We're currently in a period of disinflation. Increases in prices are decelerating, as the U.S. economy and some major international economies are decelerating (some have moved back into recession). Certain prices have begun to fall e.g., commodities prices.
Averting the fiscal cliff will require renewal of significant portions of tax-side stimulus packages that were adopted in 2001 and 2003, among some other changes. Also, he didn't necessarily predict new rounds of fiscal and monetary policy stimulus. He suggested that a recession would "most likely emerge in the U.S." without such stimulus.
If I were to venture a guess, the Fed will not change its interest rates (repeatedly indicated by the Fed) and would probably try another "Operation Twist"-type arrangement rather than full-fledged quantitative easing if things remain on the current trajectory. Additional significant deterioration in Europe and the threat of spillovers/contagion would likely lead the Fed to take additional action that could include QE3, substantial swap agreements to assure liquidity in U.S. and international markets, temporary facilities, and other coordinated measures with the ECB and perhaps other international central banks. The recent notable deceleration in Chinese growth offers another possible macroeconomic shock, but developments in Europe appear to have the greatest possibility of triggering more aggressive monetary policy stimulus.
In terms of fiscal policy, 2012 campaign dynamics preclude any additional meaningful fiscal stimulus. I also expect that the U.S. will largely avoid the "fiscal cliff," but there will likely be no meaningful medium-term fiscal consolidation. Some smaller stimulative measures might be considered e.g., another renewal of the current reduced payroll tax rates, but those measures would likely be modest and relatively insignificant overall in macroeconomic terms.
