Fed’s Stern Downplays Deflation Risk to Economy

Minneapolis Federal Reserve Bank president Gary Stern downplayed risks of deflation yesterday, while on the other hand saying that the Fed has “ample time” to contain inflation pressures by tightening monetary policy.

Stern said he and his fellow Fed policymakers are “acutely sensitive” to the need to “withdraw excess liquidity” in a timely way, while also suggesting there is no urgency.

While improved business activity is “not far off,” Stern said the recession is apt to linger for “several more months.” And the recovery, when it comes, will be “subdued,” with healthy growth not resuming until at least the middle of next year, he said.

The recession could be prolonged if financial conditions don’t improve, accordign to Stern. There have been some improvements, but strains persist, he said in remarks prepared for delivery to the Willmar Lakes Area Chamber of Commerce.

— Market News International

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