Tag Archives: James Bullard

Deflation a key risk in 2009, argues St. Louis Fed President James Bullard

Further disinflation and a possibly "deflationary trap" is a key "near-term risk" for 2009, said James Bullard, president of the St. Louis Federal Reserve Bank, on Tuesday during a speech in New York. Bullard warned,

"Expectations of deflation for the next five years may feed into real interest rates, driving real rates higher just at the time monetary policy would like to move them lower."

Deflation is a persistent decrease in general prices, or the opposite of inflation. Falling prices may seem like good news for consumers, but only to a certain point. If prices mark sustained deflationary levels that strike below the cost to produce goods and services, further economic turmoil can ensue with production cuts, payroll reductions and deepening unemployment. Deflation can intensify debt by making it more expensive, cripple equity and widen home foreclosures.

Bullard addressed the New York Association For Business Economics where he said the recession would likely continue at least to the first half of 2009, and that there is a risk for sustained disinflation and a possible deflationary cycle similar to what the Japanese experienced after 1990. Continue reading Deflation a key risk in 2009, argues St. Louis Fed President James Bullard

Inflation eases, but Fed’s Bullard concerned with cutting interest rates

Although the Labor Department’s last report indicated an easing of inflation to 5.4% and a research group said on Thursday that September inflation pressures fell to a more than six-year low, a Fed president thinks lowering interest rates is not the answer right now.

“I think lowering interest rates right now, maybe, is not the right response,” James Bullard, president of the Federal Reserve Bank of St. Louis, told an audience in Bloomington, Indiana after giving a speech on Thursday.

The Federal Reserve is naturally inclined to raise interest rates to combat inflation, and lower them to reduce the pull of downward economic activity or recession.

Continue reading Inflation eases, but Fed’s Bullard concerned with cutting interest rates