Fed\'s Lockhart says US inflation dangerously low

 

Supernsetips.com provide you the 99% sure shot stock market tips .

US economic growth is too weak at the moment to bring down unemployment, and inflation is running at levels that raise concern about deflation, Atlanta Federal Reserve President Dennis Lockhart said on Friday.

"We've slowed down pretty dramatically. Inflation is running too low. It is too close conceivably to the kind of tipping point into a deflationary environment," he told a question-and-answer session on the economy and business with Home Depot Chief Financial Officer and Executive Vice President Carol Tome.

Lockhart spoke as Fed Chairman Ben Bernanke delivered a speech in Boston that all but cemented expectations the Fed will take further steps to ease monetary policy in November.

Investors presume that, with benchmark US interest rates effectively at zero, the Fed will do this by purchasing additional Treasury bonds.

Hinting he would support such a decision, Lockhart said not all US unemployment can be explained by "structural" factors such as mismatches between workers' skills and available jobs.

"I have heard a very strongly argued view that the natural rate of unemployment in our country may have risen, but it is not 9.6%, so that suggests that there is a gap there that can be addressed by policy," Lockhart said.

US unemployment has been stuck near that level for several months following a steep recession that destroyed over eight million jobs. The economy returned to growth last summer, but activity has since softened considerably, with gross domestic product expanding just 1.7% in the second quarter.

Late last month, Lockhart said he had not yet made up his mind about how much of the rise in the US jobless rate was structural and how much of it was due to a post-recession slump in demand, saying the answer would help determine his view on policy.

Lockhart is not a voting member this year on the Federal Open Market Committee, the Fed's policy-setting body.

.@Supernsetips.com provide you the 99% sure shot stock market tips .

US inflation slows, keeping pressure on Fed

Supernsetips.com provide you the 99% sure shot stock market tips .

 

US inflation unexpectedly slowed in September even as retail sales picked up, keeping pressure on the Federal Reserve to act soon to lessen the risk of a downward price spiral.

Federal Reserve Chairman Ben Bernanke signaled on Friday the central bank would likely pump more money into the sagging economy, and investors expect the Fed will launch a new asset-buying spree as soon as next month.

The consumer price index rose 0.1% in September and the core index, which excludes volatile food and energy prices, remained unchanged for the second straight month, data released by the Labor Department showed.

Core prices were up just 0.8% in the 12 months through September, the smallest rise since 1961.

"If anything that may make (the Fed) more likely to embark on asset purchases, and that may mean they're going to be more aggressive with those asset purchases," said Richard Bryant, head of treasury trading at MF Global Securities in New York.

US Treasury prices fell and yields rose on views the Fed would try to create inflation. US stock indexes opened higher before turning mixed while the dollar hit its lowest in more than eight months against the euro.

Deflation risk

A prolonged drop in prices would likely lead consumers to put off purchases and businesses to cancel investments, compounding economic woes that are already weighing heavily on US President Barack Obama and his fellow Democrats ahead of congressional elections on November 2.

At a speech in Boston, Bernanke said high unemployment and low inflation point to a need for a further easing of US monetary policy, but he offered no details on the central bank's next step.

Investors expect the Fed could pump billions of dollars into the economy, in a second major round of "quantitative easing", to support the recovery.

"(This) gives the Fed room to do whatever it wants to do," said Jim Awad, managing director at Zephyr Management in New York.

At the same time, sales at US retailers rose by a stronger-than-expected 0.6% in September, lifted by sales of big-ticket items including autos, electronics and appliances, Commerce Department figures showed.

The reading suggested consumption may have been a bit stronger than economists had anticipated in the third quarter.

Meanwhile, manufacturing activity in New York State jumped in October, lifted by improvements in new orders and shipments, according to the New York Fed's "Empire State" business index.

"Retail sales and the Empire State index were strong, suggesting the economy is indeed improving. But inflation remains low and troubling," said Hugh Johnson, chief investment officer at Hugh Johnson Advisors in Albany, New York.

The US economy slowed sharply in the second quarter, weighed down by a hefty trade gap and dwindling fiscal stimulus.

Pressure on Obama

The weak economy has kept the pressure on the Democratic party, which looks likely to lose control of the US House of Representatives in November2 elections.

US consumer sentiment unexpectedly dipped in early October to its weakest level since July, with buying plans on the decline, a separate survey released on Friday showed.

The Thomson Reuters/University of Michigan's preliminary October reading on the overall index on consumer sentiment came in at 67.9, down from 68.2 in September and below the 69.0 median forecast among economists polled by Reuters.

The survey showed that consumers' assessments of government economic policies fell to the lowest level since Obama took office.