Yes it does, on the surface, indicate deflation as you suggest.
But my thoughts, albeit intense at times, is sniffing out a different scenario (albeit, arguably a similar outcome).
I firmly believe that asset DEVALUATION (not deflation) along with consumer PRICE INFLATION (not necessarily inflation) is on the cards. Di I sound confused - perhaps I am ;)
The contraction of credit will slow private sector growth hence asset appreciation. But the quantum of money in the system curtsy of QE will increase the cost of living (consumables as opposed to assets).
There is now increased pressure on wage rises (see recent murmuring from unions) on the back of a 'wage freeze' over the last 18 months. But that won't change access to credit as banks are becoming increasingly tighter in the provision of credit.
Back to bank interest rates, it was just interesting to see the widening gap between yield offered by the banks and cost of credit for 'assets' such as housing. It is also interesting to see the POG bottoming/ rising amidst this backdrop - this being the lead indicator for increasing prices.
Just thoughts and happy to be corrected/ enlightened.
