David Rosenberg, the former Merrill Lynch economist, now with the Canadian firm Gluskin Sheff, has argued that the run up in commodity prices is not a forerunner of a generalizedinflation because incomes are not rising and there is huge excess capacity in the economic system, as indicated by high levels of unemployment.
On the other hand, inflation that is very low could indicate a coming bout of deflation, where a generalized dropped in wages and asset prices create a vicious cycle that can destroy an economy.