Monday, May 23, 2016

Economy: What Happened With The Deflation Scare?

(Drivebycuriosity) - What happened with the deflation scare? A short time ago, in February this year, there was a lot of talk about deflation, meaning a falling price level, which could cause a new recession and worse. Since then gas prices at US pumps jumped about 30%, oil prices spiralled around 80%, the core inflation rate (without food & energy prices) stayed at 2.0%, driven by rising costs for rents, hotels, medical and other services ( fuelgaugereport  bloomberg tradingeconomics ).

There is no deflation, instead we are witnessing a comeback of inflation. Now the markets calculate with a possible interest hike in June instead of negative interest rates.

The recent deflation scare is just another sign that the markets (stocks, bonds, currencies) often behave irrational. They are mirrors for the sentiment of the majority and that the masses, the crowd, are often ignorant of the facts and prefer to follow some scaremongers.

No comments:

Post a Comment