2015-05-21 — bloomberg.com
... central banks have repeatedly overestimated inflation since the middle of 2011, according to Marvin Barth, head of European foreign-exchange strategy at Barclays Plc in London. To him, a mounting concern is that about a third of the decade-long decline in worldwide inflation is potentially inexplicable.
If he's right then what he calls "global missingflation" threatens the ability of Yellen and company to push up prices and raises questions over whether they will ever be able to declare mission accomplished and truly end their use of easy stimulus.
[In Barth's research, ] once he allowed for traditional drivers of prices such as demand or productivity, he found 35 percent of the slide in global inflation hard to pin down. Among the possible reasons could be deleveraging, technological progress, globalization, aging populations or China's deflationary impulse.
... the inflation puzzle is a reason for central banks to worry about the power of policy and may leave them reliant on factors over which they have less control such as commodities, currencies or wages to propel prices. Worse still is the risk that financial markets and the public lose faith in policy makers to control inflation. The inflation expectations of both over the next five years may start to suggest such doubts.
Of course this will continue to be a "mystery" as long as central bankers refuse to factor in asset inflation and other day-to-day expenses in the real world, such as financing costs.
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