Atlanta Fed chief: Deflation not major concern for now

Birmingham —- Federal Reserve Bank of Atlanta President Dennis Lockhart said Thursday that inflation, while cooling, is unlikely to mount a broad-based retreat.

“At present what we have seen is disinflation but nothing at this time that suggests a real risk of deflation,” Lockhart told reporters.

“Prices have come down rather remarkably” on factors such as lower energy prices, the official explained. Right now, “the inflation rate is at sort of an acceptable level, but we are watching for further price disinflation to a point where it might pose problems,” Lockhart said. Deflation “is a concern, but it not a major concern.”

Lockhart is a voting member of the interest-rate-setting Federal Open Market Committee. Many members of that body are increasingly worried that cooling prices could mount a sustained turn into negativity. Policy-makers dislike deflation because it further depresses economic activity and makes debt burdens more onerous.

Much of the Fed’s current policy stance is aimed at adding liquidity to the financial system, in a bid to counter nascent deflationary forces.

Lockhart was speaking to reporters following a speech before the Birmingham Regional Chamber of Commerce in Birmingham.