Is inflation just around the corner? Part I

There are several groups of inflation advocates. One group - similar to last year - focuses on rising commodity prices (especially oil), while another is concerned about the lengthening of central banks balance sheets and the huge fiscal deficits. In the first case, inflation is just around the corner while in the latter, inflation will be ballooning (with several proponents calling for double-digit inflation rates) once growth recovers. I still fail to see noticeable inflation pressures unless we see a currency crisis/sovereign default a la Iceland.
The rising oil prices will have some impact on headline inflation rates. However, even more so than was the case one year ago, this constitutes much more so a change in relative prices and a negative terms of trade shock for an oil-importing country. Higher oil prices mean that corporates and households need to pay more for their energy consumption. It does nothing to help increase nominal wages (with the exception of some countries where there is still wage indexation) or employment (rather to the contrary). Excess capacity in the form of unused production capacity and unemployment is much more prevalent than 12 months ago which will render it very difficult to pass on energy price rises. It therefore should reduce profit margins even more than last year. Additionally, higher headline inflation due to rising energy prices will not render houses any cheaper or lead to a real reduction in indebtedness. Inflation only helps to prop up house prices/reduce household indebtedness if it is mirrored by rising rents (which reduces the house-price-to-rent ratio and unless house prices rise, increases the expected return on purchasing a house as an investment) or rising wages (which helps to pay back debt).
In turn, I do not expect that higher commodity prices (in commodity-importing countries) will lead to higher inflation rates bar a temporary blip. Rather to the contrary, they dampen any economic recovery and put more downward pressure on core inflation rates. Furthermore, I expect the run-up in oil prices to be partially reversed again during the next weeks and months (more on that in another post).