Central banks claim a lack of inflation is the key force driving their QE policy and permitting it to continue. This is central to their ability to stimulate. The moment inflation begins to take root much of their flexibility will be lost.

We should not be deceived or led to believe that lower oil and commodity prices will in themselves bring about deflation. Often falling prices in both commodities and goods reflect a lack of demand or temporary supply imbalance that will correct itself. When that happens prices tend to rapidly adjust to reflect the "new reality of the day." The article below delves into the inflation or deflation debate.

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