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Business

Fed says risk of deflation "receding"

Latest update : 2009-05-12

Federal Reserve Chairman Ben Bernanke said on Monday that the risk of deflation was "receding" and that the dollar would remain strong even though the economic situation was difficult.

AFP - Federal Reserve Chairman Ben Bernanke on Monday said the risk of deflation was "receding," and expressed confidence the dollar would remain strong in the midst of the economic downturn.

"We have to be very aggressive... to avoid any risk of deflation, which I now believe is receding," said Bernanke.

The Fed chair admitted that the economic situation was very difficult and tough decisions would come in trying to retain price stability, particularly deciding when to tighten monetary policy.

With the US government pumping billions of dollars into the economy there are fears in some quarters that inflation, rather than deflation, would be a threat to the economy.

But he sounded an upbeat note on the role of the US currency, which some see as weakening over time against emerging currencies.

"The dollar will be strong because the US economy is strong," he said.

"For the foreseeable future, I am certain that the dollar will remain the leading currency both for reserves and for transactions".

Date created : 2009-05-12