Bernanke Says Fed Reduced Risk of ‘Japanese-Style’ Deflation

Federal Reserve Chairman Ben S. Bernanke said today the Fed’s record stimulus reduced for the U.S. a deflation threat similar to the decline in prices impairing economic growth in Japan.

“Our policies have also had the effect of greatly reducing any risk of deflation, which at the moment doesn’t seem like much of a concern,” Bernanke said today in testimony to the Senate Banking Committee in Washington. “It’s hard to explain to people why inflation that’s too low is a problem, but if it’s too low you run the risk of a Japanese-style situation where prolonged deflation is a barrier to economic growth and stability.”

The Fed chairman also said he supports efforts by Japan to halt a decline in prices.

“I think that they should try to get rid of deflation,” he said. “I support their attempts to get rid of deflation.”

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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