Bloomberg Reports of Deflation’s Demise Greatly Exaggerated

Bloomberg Reports of Deflation’s Demise Greatly Exaggerated

Today, Bloomberg was quick to post a headline trumpeting the end of deflation:

Deflation Disappears With Bond Market Showing Growth

Oct. 25 (Bloomberg) — The bond market is showing Federal Reserve Chairman Ben S. Bernanke will succeed in sparking inflation after the smallest gain in core consumer prices in half a century increased concerns that the economy will deflate.

Expectations for rising consumer prices have increased faster in the U.S. than any other bond market this month as central bankers made the case for monetary easing through additional asset purchases. Yields on 30-year Treasuries climbed as much as half a percentage point since September to 2.61 percentage points more than similar maturity inflation-indexed debt, the widest gap since May and an indication for anticipated gains in consumer prices.

Full article here (hat tip JL for the link).

Reading the article at face value, you may be inclined to exclaim: “Oh crap, they’ve done it!  They’ve ignited the ambers of an inflationary holocaust!”

Only problem is that the charts don’t exactly support this hypothesis.  I wouldn’t exactly call this a breakout:

10 Year Treasury Yield October 2010Source:

Will printed money lead to higher rates?  It probably will – eventually – but we’re not there yet.