Atlanta Fed’s ‘Deflation Probabilities’ index: that horrifying threat (lower prices) has been vanquished.
The scourge of consumer price deflation has been brandished furiously by central banks around the world in order to justify radical, scorched-earth monetary policies, including zero-interest-rate policy (ZIRP), the entire absurdity of negative-interest-rate policy (NIRP), and asset purchases not only of government bonds but also of everything else, depending on the central bank, including corporate bonds, stocks, asset-backed securities, and, as German politician Frank Schffler predicted with uncanny accuracy back in September 2011, ‘old bicycles.’
Central banks have also brandished the threat of other mayhem that could befall the earth if it weren’t for those policies, but the threat of consumer price deflation has played a critical role.
Well, those of you in the US, don’t worry: your overall prices, as determined by the Consumer Price Index, now have exactly 0% chance of dropping over the next five years, down from a probability of 14.1% in May last year.
This post was published at Wolf Street by Wolf Richter ‘ Jan 26, 2017.