From the editor

• Author: Laura Wallace
• Position: Editor-in-Chief
• Pages: 1

Page 1

For Much of the post-World War II period, policymakers worldwide have been preoccupied with fighting inflation-especially in the 1970s and early 1980s, when annual inflation rates hit double digits in several industrial countries. But, in recent years, the word deflation (falling prices) has increasingly cropped up in economic circles, and not just in references to Japan's struggle with sluggish growth since the mid-1990s. In May 2003, the European Central Bank said that it wanted a "sufficient safety margin to guard" against risks of deflation in the euro zone. The chief worry is Germany. And the U.S. Federal Reserve Board warned of the danger of an "unwelcome substantial fall in inflation"-a remark that the press seized on as highlighting a fear of deflation, not just disinflation (a slowing down of price rises). To help demystify the topic, the June issue of F&D takes an in-depth look at deflation and inflation-including hyperinflation (defined as inflation of over 50 percent a month), which we are warned could return to fiscally profligate developing countries with heavy debt loads and weak institutions. In a new feature, Country Focus, we provide a snapshot of Japan's stagnant economy. In Back to Basics, we take a look at the increasingly popular practice of inflation targeting.

Historically, deflation has tended to go hand in hand with recession-the last thing the global economy needs after a year and a half of unspectacular and only partial recovery from what came close to being a global recession in 2001. Nothing would contribute more to the fight against poverty than a full global recovery and sustained growth. But achieving this involves more than avoiding deflation and ensuring adequate overall demand. It also involves putting in place good structural...