The Death of Inflation? Talk by the Deputy Governor, Dr S.A. Grenville,

For the two decades of the 1970s and 1980s, inflation was a central and continuing preoccupation of macroeconomic policy. Now, in the 1990s, the industrial world is experiencing almost universally low inflation. Not only has the OECD average fallen, but the range of inflationary experience from country to country has also narrowed sharply (Graph 1). Low inflation is now the international norm. Roger Bootle, in The Death of Inflation (Bootle 1996), has put forward a stronger argument. Not only is inflation down, but it is ‘out for the count’: it has been definitively beaten. The case is argued both empirically and analytically. Graph 2 makes a compelling case that, leaving aside wars, this 20-year inflationary period is so unusual as to be regarded as an aberration. This is backed up by analytical argument: • rapid technological change has lowered prices, undermined established market positions, and sharpened competitive forces; • international integration and competition from the dynamic newly-industrialised countries is putting more downward pressure on prices