A recent viral hit on the internet features satirical country western singer Merle Hazard crooning: “Will we become Zimbabwe or will we be Japan?” Neither hyperinflation nor pernicious deflation lie in the immediate future for the US but Treasury markets have been whipsawed by conflicting data points and duelling economic seers. Wednesday’s tepid 0.1 per cent rise in monthly US consumer inflation, which brought the biggest year-on-year price decline in 60 years, bolstered the argument of those such as economist Paul Krugman, who calls deflation the “clear and present danger”.

Too much should not be made of a few months’ data though, particularly a year after a record spike in commodities. Economists at ING see deflation peaking in the third quarter and mild inflation returning by the fourth with the full-year consumer price index reaching a positive 1.5 per cent for all of 2010. Of course even muted inflation following a tsunami of fiscal and monetary stimulus bolsters the argument of those fearing falling prices, but it is too early to break out the Japanese phrase books.