LONDON/NEW YORK - An anorexic under doctor's orders to put on weight might fret unnecessarily about getting fat one day.

Today's generally subdued inflation prompts similar worries. Surely the extraordinary steps central banks are taking to jump start growth will eventually push prices sharply higher, inflating away the debts hobbling the global economy?

To monetarists wedded to Milton Friedman's mantra that inflation is always and everywhere a monetary phenomenon, the bloated balance sheets of the Federal Reserve and other major central banks are so much dry tinder ready to catch fire.

The Fed says long-term inflation projections are stable, but when I look at things I see money growth has gone way up, the dollar has depreciated even against weak currencies like the euro and now productivity growth has slowed. Those are not comfortable signs, said Allan Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh, Pennsylvania.

Only the sort of outcry from Main Street that prompted U.S. President Jimmy Carter to appoint Paul Volcker as Fed chairman in 1979 with a mandate to crush inflation could prevent prices from spiraling higher, he said.

That message has to come from the public. We won't get it from the bond vigilantes and not from the Fed and not from this administration, said Meltzer, author of A History of the Federal Reserve.

Yet the solid consensus is that inflationary worries are misplaced given the dim outlook for growth that prompted the Fed this week to say it intended to keep short-term interest rates close to zero until 2013.

When it comes to most of the developed world, there are no domestically generated inflationary pressures, said Richard Cookson, global chief investment officer at Citi Private Bank in London.

GUMMED-UP MONEY MACHINE

Cookson says many countries find themselves in the position Japan has been in for the past two decades: as the private sector pays down unsustainably high debt, consumers and businesses are loath to borrow and spend.

Under such circumstances, the mechanism whereby newly created central bank reserves are multiplied into loans and bank deposits breaks down. Moreover, cash is flowing through the economy much more slowly than usual, removing another potential generator of inflation.

At some point, the money multiplier will function normally once more, but not any time soon, Cookson said. The problem is that it could take many years because balance sheets are so ravaged, he said.

With yields on conventional U.S., German and British bonds languishing at historic lows, markets seem to share the view that economic recovery will be gradual.

I think the Fed correctly came to the realization that it is going to be a long slow slog, and long slow slogs generally don't generate a lot of inflation, said Michael Feroli, an economist with J.P. Morgan in New York and a former Fed staffer.

Harm Bandholz, chief U.S. economist at UniCredit Research in New York, said the Fed's easing, taken in isolation, could be viewed as adding to price pressures.

But general inflationary pressure is not high in this type of environment of continued slow growth and deleveraging, he said.

SICKLY Labor MARKET

A weak U.S. labor market is Exhibit A in making the low-growth, low-inflation case.

So many Americans have given up the search for a job that only 58 percent of the working-age population was employed in July, a 28-year low.

Moreover, those in work saw their inflation-adjusted hourly compensation drop 1.2 percent in the second quarter from a year earlier, confirming the trend of real wage stagnation that has marked the U.S. economy since the 1970s.

Economists at Standard Chartered Bank said they expected the jobless rate, now at 9.2 percent, would still be at 8.5 percent at the end of 2012. This means weak wage growth and low inflation pressure, they said in a report.

True, the spread between 10-year nominal and inflation-linked U.S. Treasury yields, a key indicator of inflation expectations, is much higher than in early 2009 when fear of deflation was raging at the height of the global financial crisis.

And gold, a classic hedge against inflation, scaled a record high this week and is up 24 percent so far this year.

But John Higgins, senior market economist at Capital Economics, a London consultancy, said inflation expectations were likely to recede as commodities lose altitude.

What might trigger that is further signs of economic weakness and signs that inflation itself is subsiding, Higgins said.

Oil has fallen about $20 a barrel since April and copper, another super-sensitive barometer of global economic demand, fell to an eight-month low this week.

The retreat in key commodities partly reflects slowing growth in China brought on by steady monetary tightening.

This in turn has fanned expectations that China's own stubbornly high inflation, which touched 6.5 percent in the year to July, is close to cresting. [ID:nB9E7H902X] Indeed, economists at J.P. Morgan reckon inflation across emerging markets has probably peaked.

But that does not mean policymakers in developing countries can lower their inflation guard. Talk of currency wars has not gone away. Beijing for one has voiced anger that the Fed, with its latest easing, could once again export inflation by fuelling capital inflows and cheapening the dollar.

The recent correction in global commodity prices could help to ease some of the inflationary pressure in the short run, but in the medium run loose monetary policy in the West may heighten imported inflation concerns, Jianguang Shen, chief China economist at Mizuho Securities in Hong Kong, said in a note.

(Reporting by Alan Wheatley, editing by Mike Peacock)

Inflation