John Makin, a visiting scholar at the American Enterprise Institute, recommends in today’s Financial Times that the Federal Reserve and other major central banks “announce firm price level targets that imply rapid money creation through more aggressive asset purchases.” The counsel follows his essay published earlier this month that warns of the “rising threat of deflation.”

Targeting higher inflation is controversial at this stage, although that’s largely because outright deflation hasn’t set in, at least not yet. But the sentiment for inflation targeting could change if the general price trend shifts from the current disinflation to deflation proper. That’s a possibility, or so the market tells us. The outlook for inflation has been trending lower recently, based on the yield spread between the nominal and inflation-indexed 10-year Treasuries. As the chart below shows, this measure of inflation expectations was 1.82% for the decade ahead, as of yesterday—a sharp drop from around 2.45% in late-April. Normally, disinflation of this degree might be welcomed. But given the weak economy of late–the anemic job growth in particular–falling inflation expectations are a problem.

The good news is that inflation expectations aren’t getting any worse at the moment. And yesterday’s modestly bullish news on initial jobless claims provides some incentive for thinking that the risk of deflation may wane in the weeks and months ahead. But it’s still too early to say for sure. Meanwhile, the data overall is still mixed. Yesterday’s news of a sharp drop in manufacturing activity in New York state and another decline in wholesale prices last month (the third consecutive retreat) certainly don’t boost confidence that the D risk has passed.