Ben Bernanke: Inflation Levels Too low Bernanke spoke at length about the current levels of inflation, considering them "too low," with the risk of deflation being more than desirable. He also said he expected inflation levels will likely remain subdued as inflation expectations remain stable and substantial slack in productive resources restrain cost pressures.
While he said the rate of inflation was below the levels consistent with the Fed's mandate, Bernanke did not specify a target rate for inflation. He merely argued that the central bank would prefer a "modestly positive" rate of inflation. The rationale being, a higher rate of inflation allows for higher nominal interest rates, which then provides the central bank greater latitude to reduce rates when needed to stimulate the economy. It also keeps the threat of deflation under check.
Bernanke's comments came as the labor department reported that the core rate of inflation at the consumer level remained unchanged in September.
Consumer prices rose 0.1% in September after rising 0.3% in the prior month, led by increase in food and energy prices, the Labor Department said on Friday. The rise was slightly below the 0.2% increase the market was expecting, according to estimates from Briefing.com.
The core rate of inflation, a more relevant measure because it excludes volatile food and energy items, remained unchanged. Consensus was calling for a 0.1% increase.
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