Forget the currency war, now it’s a deflation war
Despite all the liquidity sloshing around the financial system courtesy of quantitative easing, inflation remains worryingly low – and it may be because central banks are exporting deflation, HSBC said.
"It's a monetary version of currency wars," the bank said in a note. "Rather than removing deflationary trends, monetary stimulus merely allows central banks to export deflation to other parts of the world."
Sizeable exchange rate declines have followed the initial forays into quantitative easing from various global central banks, temporarily lifting inflation in "host" countries, the bank noted.
"Yet, for every exchange rate decline, there has also, inevitably, been an exchange rate rise. And for those who have experienced 'unwanted' exchange rate gains, inflation has ended up lower than expected and, often, lower than desired," it noted, citing the euro zone's lower-than-expected inflation in the second half of this year.
The European Central Bank has avoided fresh stimulus moves even as the Federal Reserve continued its asset purchases and the Bank of Japan introduced a massive asset-buying program in April.
"If unconventional policies work primarily through the exchange rate, they serve primarily to export, rather than cure, disinflationary pressures," it said. "It's increasingly apparent that one country's monetary stimulus is another's ball and chain."
But with the exception of Japan, all regions have recently experienced unexpected declines in inflation, it noted.
That may be because with interest rates effectively around zero, monetary stimulus is merely boosting asset prices, without spurring faster economic growth, the bank said.
"If companies, households and governments are busily deleveraging, monetary stimulus may fall on deaf economic ears," HSBC said. "If there is uncertainty about the longer-term fiscal arithmetic, increases in government borrowing may only prompt others to save more or, alternatively, repay debt more aggressively. Under these circumstances, whatever any individual central bank chooses to do, it may be powerless to prevent a global deflationary bias."
(Read more: Could QE spur deflation, not inflation?)
Persistently low inflation presents real dangers to the global economic recovery.
"In a standard economic cycle, activity leads inflation," HSBC noted. "In a post-bubble environment, where debts are high and deleveraging is rife, the opposite applies: excessively low inflation increases real debt levels, makes deleveraging more difficult and, eventually, suppresses demand and activity."
Japan is the obvious example, it said, noting a mid-1990s recovery was derailed by a combination of creeping deflation and premature policy tightening.
(Read more: Is the euro zone at risk of Japan style deflation?)
HSBC doesn't expect an outright descent into deflation, but it sees risks inflation may continue to decline over the next two years.
"Forward guidance may increasingly have to focus on the dangers associated with inflationary undershoots than on growth overshoots in the coming months, implying lower interest rates for longer, particularly in the U.S. and the euro zone."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1