TOKYO (MNI) – St. Louis Federal Reserve Bank President James
Bullard said here Monday that he was once concerned about possible
deflation in the U.S. in the wake of the global financial crisis and
ensuing recession but is much less concerned about that risk now.
As the U.S. and global economies have moved out of the recession,
“we have turned the corner of this issue,” he told an economic seminar
but added that it’s a different story in Japan, which has been mired in
years of stubborn price drops.
Bullard noted that U.S. core inflation has drifted down “a little
bit” in recent months but this has been due in large part to a decline
in imputed rents, whose accurate calculations have been made more
difficult by the troubled U.S. housing market.
“The U.S. housing sector is obviously very distorted at this point
in time and even more distorted than usual. And try to impute rents in
the U.S. housing market and try to use that as a component of
inflation,” Bullard said.
“I think that part is pushing down the core inflation measure to
some degree. And for that reason, I’m not as worried about the
deflationary scenario at this point,” Bullard continued.
The U.S. public’s long-term inflation expectations are over 2%, he
said, adding: “Investors are expecting inflation in a 5- to 10-year
range actually above our implicit target.”
“So for that reason I’m also not too worried about deflation in the
U.S,” he concluded.
tokyo@marketnews.com
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