At last there is reason to be cheerful. CPI has fallen from 4.2% in December to 3.6% in January, and for that we should be thankful.
The Bank of England is thankful all right. In their eyes this is ample justification for them to extend their Quantitative Easing programme and purchase a further £50bn of gilts. Despite Sir Mervyn King having to write his 13th letter to the Chancellor explaining why inflation is more than one percentage point away from the 2% target, according to the Bank, the threat of deflation is still a real worry. But to put it simply, this is utter nonsense.
The economist's argument against deflation goes something like this: "If a consumer can be certain that their money will be worth more tomorrow than it is today, then they are more likely to retain their money rather than spend it. This is bad for the economy."
There is a problem with this line of thinking, however, in that it assumes that you and I, as consumers, can afford to defer purchasing all of our products until tomorrow. Obviously, this isn't the case. If I fancy popping out for a sandwich at lunchtime, I can't exactly wait 24 hours to do so. A less crude example would be to consider an IT company needing to buy the latest software; they cannot afford to wait 12 months for the price to come down. Faced with stagnant wages and rises in the cost of food, utilities and other essentials, I can think of a good number of people who would embrace a few quarters of deflation with open arms.
Regardless of what the Bank is telling us, we are far, far away from the prospect of deflation. For inflation to actually hit a five-year rolling average of its official 2% target, we would need to have deflation at 2.64% for the whole of 2012! Even if deflation did ever come to occur, it is something that can be solved very simply by issuing further QE - something the Bank is already in favour of doing.
So why after four years are they still trying to scare us with the same old phantom? The reason is that the fear of deflation is being used to justify evermore QE at a time when there is high CPI, but low wage inflation and interest rates.
Last Thursday the Bank of England announced its plans to extend its quantitative easing programme by an additional £50bn - thereby taking the total assets purchased to £325bn. The Bank said that this decision had been made against the backdrop of a weak economy, and that without more QE inflation was likely to undershoot the 2% target over the medium term.
So where exactly has this £325bn gone?
It certainly hasn't gone in to the pockets of your average Brit. Unemployment has risen from 6.5% in March 2009 - the date the Bank initiated its QE programme - to 8.4% in January 2012; the majority of those fortunate enough to still be in work are experiencing a real-terms decline in their take-home pay due to low wage inflation and high CPI; and millions are turning to credit cards and/or payday loans to help pay their housing costs.
So where is the money? Quite simply it's sat on the balance sheets of banks and pension funds. By the end of this next phase of QE, the Bank will own just over an incredible 30% of gilts; the main result of it all being a transfer of capital risk from the private sector to the State.
All of this money - equal to trillions of pounds - created by Central Banks across the globe has been used to shore up global financial institutions which created money out of thin air, leveraged it to create even more, and then ended up a creek without a paddle when they eventually began asking themselves who was liable for it all in back in 2008.
Those institutions that took part all of a sudden found themselves very short of cash. But instead of calling the administrators, governments arrived in their lobbies and offered up their respective taxpayers as guarantors of choice. The result being that we - the taxpayers - are now obliged to provide the real value to replace that fairytale money that allows the global markets to continue to function.
This shortfall is being and will continue to be made up by QE, during which time the prices of goods will carry on rising whilst the standard of living will generally continue to decrease. This is arguably the largest transfer of wealth to have taken place in modern history; a coup of consummate proportions.