So can deflation occur again???The Fed is scared about deflation and is doing all it can to prevent it. A few comments yesterday from James Bullard, president of the Federal Reserve Bank of St. Louis:http://online.wsj.com/article/BT-CO-20130523-705172.html?mod...Inflation in the U.S. needs to climb back toward the 2% target before the Federal Reserve should consider slowing the pace of its asset purchases. He is "nervous" about the fact annual inflation in the U.S. has been trending down. Annual inflation slowed to 1.1% in April, or 1.7% excluding food and energy prices. He "would like some reassurance" from the economic data that inflation "is going to turn around and go back towards target before we start tapering," using Fed lingo for reducing the pace of its asset purchases from $85 billion a month. Mr. Bullard currently holds one of the voting slots on the Fed's rate-setting panel that rotate among regional central bank chiefs. He said he expects the unemployment rate in the U.S. to slow to around 7% by year-end. The Fed has said it won't touch short-term rates until unemployment slows to 6.5%. Mr. Bullard said 6.5% is a threshold and not an automatic trigger for Fed action.
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