Long-run forecasts a good anti-deflation tool

The Federal Open Market Committee's new long-run inflation forecast reduces the chance of a deflationary spiral, a new paper form the San Francisco Federal Reserve posits.

This analysis reveals that a substantial increase in economic slack can lead to deflation, but the depth and duration of the deflation depends on how well-anchored inflation expectations are. The analysis suggests that a central bank should take appropriate actions to stem the emergence of substantial slack in the economy

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