Forex Flash: Deflation remains an unhappy scenario for developed countries – UBS

FXstreet.com (Barcelona) - In many developed countries, the post-crisis labor market has registered structural shifts, while any residual benefits from policy accommodation has been offset by austerity. According to Research Analyst Gareth Berry at UBS, “If headline and core price trends force central banks to tackle deflation head on, we may begin to see new policy shifts which would have important implications for currency markets. Central banks (just ask the BoJ) will acknowledge that getting out of deflation is much harder than inflation, so for the Fed, ECB and BoE - there may be an impulse to act very early to prevent expectations from arising altogether.”