Monetary Policy

Deflation may be on the horizon


In the Media

Christopher Snowdon writes for Spiked!

In the Media

IEA research quoted in ConservativeHome

Julian Jessop quoted in The i

IEA Economics Fellow Julian Jessop has been quoted in The i arguing that deflation may be on the horizon. Deflation (the opposite of inflation) is when the general price level decrases. People can buy more goods and services with less money, but there is a danger that people will reduce their spending in order to get a better price later on.

The article said:

“Julian Jessop, an independent economist who is a fellow at the Institute of Economic Affairs think-tank, thinks there’s a significant possibility that inflation will go sub-zero, something that seemed incredibly unlikely a year ago when it sat in double digits.

“He told The i there is now a ‘good chance’ of deflation happening, or at least, a prolonged period of the Consumer Prices Index (CPI) remaining below target.

“But Mr Jessop thinks there are two possible scenarios. ‘One possibility is that we have large falls in energy and food prices as recent supply shocks unwind,’ he says.

“‘This could result in an outright fall in the overall inflation figure. But as long as core inflation [which strips out volatile measures such as food and energy price changes] is still positive, this would be nice problem to have,’ he explains.”

Read the full article here.