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Inflation Gestation

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So where’s the deflation which Bank of England governor Mervyn King is so desperate to avoid?

...What’s evident from King’s opening statement to the Treasury Committee’s hearing on inflation, however, is that the central bank is still relying on something called `the output gap‘ in estimating inflation/deflation risk — despite having mentioned in July that the monetary policy committee might have overestimated the amount of `slack’, or spare capacity, in the economy already.

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