The pressure for falling prices is gathering momentum. The producer price index plunged by a record 2.8% in October. That follows on an 0.4% drop in September. Still, the slight rise in the core producer price index–a number that excludes fuel and food–was up a fraction.
High on the list of things the monetary authorities need to worry about is deflation, or an overall fall in the price level. A few years ago, I wrote a book Deflation: What Happens When Prices Fall?
It’s a timely read.
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