Inflation, What Inflation? – Says Bloomberg Report

In a report today, economists at Bloomberg think that there is a likely chance that deflation will continue to prevail this year.

Their argument rests on the lousy unemployment numbers and poor consumer confidence, of late. The Dallas Fed’s Trimmed Mean Inflation Index, which is a smoothed out index of consumer inflation, continues to fall.

The article reports that the viewpoint that inflation is rampant is greatly overstated. Take that gold bugs! The interactive article reports that the M2 – Money Supply, has actually been falling recently.

“Furthermore, much of the expanded reserves at the Fed is sitting idle, and can’t be lent out because they’re being used as bank reserves,” the article states.

The flip side of this argument is that the reserves at the Fed can’t be stimulating the economy if they’re sitting idle. Perhaps the Fed needs to do more to stimulate bank lending if there is to be a recovery in the private sector. But the good news, if this report is to be believed, is that inflation won’t be a problem this year.