The risk of deflation in the UK grew today after a key measure of inflation slumped to 0% for the first time in half a century.
The Bank of England may set interest rates as low as 2% by the end of 2009 to prevent a dangerous deflationary cycle, according to Tim Drayson, economist at Legal & General Investment Management (LGIM).
The Bank of England "should and will" significantly cut interest rates in the coming months to tackle mounting domestic deflationary issues, Bill Mott believes.
Property search services provider Propertyfinder.com says its April survey of househunters reveals a sharp drop in confidence on the basis deflation will hit the market in the coming 12 months.
House prices up more than 50% in markets such as the UK since 1997 have significantly increased the risk of economically damaging price corrections, the International Monetary Fund warns.
Fears of a Chinese equities bubble are overdone because the role of the domestic consumer and improving transparency of earnings have been underestimated, says Martin Lau, director of Greater China equities at First State.