“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.”
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