Risk of inflation in the US only a distant threat

With inflation in the US currently running at 3% a year, Haydn Davies, chief economist at Barclays Global Investors, believes the outright risk of deflation in the country is only a distant threat. Davies says there are two types of deflation. The first is that which comes about through a collapse in demand, whereby firms and households are forced to accept lower prices for their service. The second kind is that which is the result of strong productivity growth. In this case, firms can charge lower prices and still make strong profits. The distinction between the two is important to ...