deflation?

• Even with energy prices having flattened out of late, the deflation risk confronting the US economy is real. Moreover, unless there is a powerful V-shaped recovery – which we deem highly unlikely – it is going to be several years before inflation risk resurfaces. – David Greenlaw & Ted Wieseman, Morgan Stanley
• While the pricing environment clearly remains soft, we continue to believe that deflation will not happen unless downward price pressures widen out beyond the Fearsome Five [new vehicles, used vehicles, airfares, apparel, hotel rates], a development that the data do not currently support. – Omair Sharif, RBS
• The decline in the headline CPI will almost certainly get tongues wagging about deflation again. As we frequently noted in the past, we expect the CPI to decline in 2009 but do not expect a problematic deflation to take hold in the economy. Core inflation is expected to moderate to around a 1.0 percent pace later this year, which is still solidly in positive territory. –Mark Vitner, Wachovia Economics Group
• So how much comfort should the Fed take from the fact that there isn’t much evidence of a deflation emerging, despite what the annual headline inflation rate suggests? To our minds, not much at all. With the unemployment rate and the output gap both headed for 10% and the financial system still crippled, the risk of a pernicious debt-deflation emerging is still much bigger than the risk that the Fed’s QE actions will lead to runaway inflation. –Paul Ashworth, Capital Economics

http://blogs.wsj.com/economics/2009/04/15/economists-react-divided-on-risk-of-deflation/