IMF's Christine Lagarde Warns of Growing Threat of Deflation

Although core U.S producer prices showed a nice uptick-0.3% for December-it would have been nice if half the core increase hadn't come from tobacco products.
From the Financial Times:

The growing danger of deflation threatens to derail the global economic recovery, Christine Lagarde, managing director of the International Monetary Fund, said on Wednesday as she stressed that the world had yet to put the financial crisis behind it.

“With inflation running below many central banks’ targets, we see rising risks of deflation, which could prove disastrous for the recovery,” said Ms Lagarde, in a speech at the National Press Club in Washington. “If inflation is the genie, then deflation is the ogre that must be fought decisively.”

With central bankers afraid even to mention the word “deflation”, Ms Lagarde’s remarks make her the first high-profile policy maker to give warning that extremely low inflation in rich countries could result in the kind of falling prices that have dogged Japan’s economy for two decades.
 Slow inflation could allow central bankers to keep monetary policy exceptionally loose, even as employment picks up in countries including the US and the UK.

“Central banks should return to more conventional monetary policies only when robust growth is firmly rooted,” said Ms Lagarde....MORE

HT: FT Alphaville's The Closer post