Topsy-turvy times

According to today’s Guardian,

Bank of England governor Mervyn King today warned that the recession in Britain will be deeper and longer than expected, and signalled interest rates will have to fall further to stop inflation dropping far below its 2% target.

At first I thought this must be a misprint (not unheard-of at the Guardian, afer all) having always been led to believe that inflation was a Bad Thing.

Now the Bank of England is worried there might not be enough inflation! It’s like the police getting concerned about falling crime rates (which I suppose they might do, secretly at least). I think the point is that whilst raging inflation is bad, deflation is also damaging to the economy because it encourages consumers and businesses to delay purchasing goods and services so long as they believe they will become cheaper if they wait.