The economics of deflation Bank of England（通货紧缩的经济英格兰银行）.pdf

The economics of deflation Speech given by Ben Broadbent, Deputy Governor for Monetary Policy, Bank of England At Imperial College Business School, London 27 March 2015 I would like to thank Alina Barnett and David Learmonth for research assistance and I am grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. 1 All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx The CPI in February this year was no higher than in February 2014. This is the first time the UK has failed to record positive annual inflation for over 50 years. Inflation was briefly negative in late 1959 and early 1960. Before then, you have to go back to the early 1930s, and the agonies of the Great Depression, to find a period when UK consumer prices fell over a sustained period (Chart 1 plots three-year rolling averages of inflation). Because of the depth of the economic downturn at that time, and the more recent stagnation of Japan, the weakness of price inflation today has raised fears in some quarters about the risks of sustained deflation in this country. The MPC’s objective is not simply to prevent prices from falling: it is to ensure they rise at the target rate of 2% a year. Because of the attention it’s been getting, however, I’m going to focus today on negative inflation specifically. I’ll divide the substance of my remarks in two. One part will discuss the basic economics – how and why it matters if prices decline over a protracted period – the other, the frequency and implications of def