U.S. Deflation Risk Rises on Europe's Woes, Ward McCarthy Says: Tom Keene

The risk of deflation has increased because of the economic crisis sweeping Europe, said Ward McCarthy, chief financial economist at Jeffries & Co. Inc. in New York.

“We do not have any inflation pressure of note,” McCarthy said today in an interview on Bloomberg Radio with Tom Keene. “We have seen some disinflation actually since the beginning of the year. It could evolve into deflation.

“On the international level there is tremendous price competition,” McCarthy said. “There is a risk of deflation here at the same time it’s not completely clear what’s going to happen.”

In the U.S., the cost of living dropped in April for the first time in more than a year, according to Labor Department statistics released today.

The consumer price index declined 0.1 percent last month. Excluding food and fuel, the so-called core rate was unchanged, capping the smallest 12-month gain in four decades.

Retailers are cutting prices to bolster sales as customers face almost 10 percent unemployment, suggesting the U.S. economy is recovering without causing prices to accelerate.

(In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.)

To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net; Thomas R. Keene in New York tkeene@bloomberg.net.

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