The threat of deflation has been making its rounds as inflationary measures like the consumer price index (CPI) fell for the first time in 13 months in April, dropping 0.1%. Core CPI – which excludes food and energy prices – rose only 0.9%, its smallest gain since 1966. The producer price index (PPI) also dipped 0.1%.
"The recent trend in inflation has been swiftly to the downside," Eric Green, chief U.S. rates strategist at TD Securities, told Reuters. "All measures of inflation are decelerating."
Investment behavior has shown an anxious but mixed sentiment of hedging against both inflation and deflation: Demand for gold metal is outstripping supply by more than 1% per year and has pushed gold prices to record highs, while others have sought out both corporate bonds and U.S. Treasuries for safety.