Time to Go to Work

Bringing inflation under control has always been a great challenge around the world.   Federal Reserve Chairman Ben Bernanke made the case during his speech for the central bank to take new steps to boost economic growth, saying that inflation is low and that the economy is growing slowly in order to bring down unemployment.   He pointed out how price inflation is declining and how the Consumer Price Index (CPI) has gained a slow increase.   He also stated that structural unemployment is not responsible for most individuals being out of work and long-term inflation expectations show no signs of rising.   Inflation is likely to remain below the Fed’s 2% goal as it currently has been at 1% and there is a risk of deflation.   Mr. Bernanke described the economy better than before however moderate output growth over the next year will not exceed by much therefore continuing to keep unemployment rising.   Currently unemployment is at nearly 10%, which is undoubtedly high.   The Fed Chair stated that it is revisiting monetary policy in a low inflation environment and that the Federal Open Market Committee (FOMC) is prepared to provide additional accommodations to help in the economic recovery and hopes to return inflation to a more steady level.   It is quite likely that after the Nov 2-3 meeting that the Fed will resume buying U.S. Treasury bonds.   This would be the assistance that would help reduce long-term interest rates and support economic growth.  
In the article it is noted that Mr. Bernanke discusses how inflation is too low at 1% and that risk of deflation is higher than desirable.   Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.   Deflation is the decline in the price level of goods and services. Deflation occurs when the annual inflation rate falls below 0%.   If price levels rise, currency buys fewer goods and services.   So inflation's effects on an economy can have both a positive and negative impact.   He... [continues]

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