Why deflation is really possible

With prices rising rapidly, the suggestion that deflation could be round the corner seems odd. But as the debt binge of the last few years reverses, the possibility creeps ever nearer.

By Paul Amery

It may seem odd to suggest the possibility of deflation at a time when the prices of critical goods food and energy are skying worldwide. The UK CPI inflation rate has just registered a 3.3% annual increase, well above the government's target of 2%, and is forecast to exceed 4% by year-end. The broader retail price index has risen at 4.3% per annum, and people in many sectors of society are seeing their personal cost of living go up at an even faster rate.

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