Deflation – a word that was often thrown around when the crisis was still a ‘baby-monster’, seems to be increasingly becoming a reality. The news that has added fuel to the fire of economic despair in Britain speaks of a mere symbolic inflation rate of 0.1 percent annually.
Inflation measured by the retail price index has deepened its uncomfortable slide in January of this year, compared to 0.9 percent in December of last year. This ridiculous 0.1 percent is the lowest rate since March 1960. However, to avoid a completely bleak picture, there is another index used by the central bank, the consumer price index, which is supposed to provide a somewhat happier target figure of 2 percent, and it fell this month significantly less than the aforementioned index. This month, it showed a 3 percent annual inflation rate, which is down by 0.1 percent compared to December. If only someone had known how much they would rejoice at inflation…
Playing with numbers is the result of a burning desire for at least some positive indicator, after Governor Mervyn King stated last week that by summer, the British economy would contract by 4 percent, double the expected figure from three months ago, which would mean the worst peacetime recession since 1931. Each day of the crisis brings a deeper plunge into the history of poor results. Just when the public had digested this gloomy forecast, this week Deputy Governor Charles Bean stepped in, explaining to the concerned public that his boss was mistaken and that things could be – worse, meaning that the contraction could be more than 4 percent. (Vanja Figenwald)
