Federal Reserve's James Bullard: Long-term Deflation is a Possibility

washingtonpost.com — A top Federal Reserve official warned Thursday that the nation faces the risk of an extended period of falling prices known as deflation, such as that experienced by Japan over the past two decades.

James Bullard, president of the Federal Reserve Bank of St. Louis, argues in a new paper that large-scale quantitative easing -- or purchases of government bonds and other assets by the central bank -- would be the best policy tool to prevent that possibility, though he doesn't endorse making such a move now.

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