Will Deflation Bring More Easing & QE ?

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“WASHINGTON (MarketWatch) – The Federal Reserve will be watching price data closely for further signs of falling prices, two central bank officials indicated on Thursday Richmond Fed President Jeffrey Lacker and Minneapolis Fed President Narayana Kocherlakota said that that the Fed must be on its guard against falling prices. “If inflation looked like it was going to sag further on a persistent basis, I would certainly consider stimulus for the purpose of bringing inflation up to target,” Lacker told reporters, according to Bloomberg. In a separate speech, Kocherlakota said that cooling price pressures were “definitely a cause for concern.” The comments echo remarks made Wednesday by St. Louis Fed President James Bullard, who said he was concerned that the Fed’s preferred measure of inflation, the personal consumption expenditures price index, increased at a 1.3% rate in February, well below the Fed’s 2% target. Economists said the implication of the concern is that the Fed may maintain its $85 billion-per-month asset-purchase program for longer than expected and perhaps augment it with other easing steps.”

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