deflation

According to the latest survey of the NABE economists the immense U.S. budget deficit is the gravest threat facing the economy, topping high unemployment and the risk of inflation or deflation.

47 member panel of forecasters of the National Association for Business Economics increased the estimate for the 2011 federal deficit to $1.4 trillion from $1.1 trillion in its previous survey in November.

This week the Federal Reserve made a tepid forecast for the economic development in spite of recent data that suggested that recovery was strengthening and justifying $600 billion bond-buying program.

After its policy-setting meeting the fed said that measures of underlying inflation were "somewhat low" although it acknowledged rising commodity prices that have fueled global inflation worries.

The move of the US Federal Reserve to inject more money into the economy could give its effects and contribute to inflation but the growth still will remain moderate through the next year, predict the group of analysts. The National Association for Business Economics (NABE) reported that its 51 members ranked inflation as a bigger worry than deflation. The survey was conducted between October 21 and November 4.

Charles Nenner, founder and president of Charles Nenner research, forecasts that the Dow Jones Industrial Average will lose about half of its value over the next couple of years as it follows a Nikkei-like pattern of several sharp rallies in an overall decline.

As Federal Reserve Chairman Ben Bernanke and Nobel Prize winner Joseph Stiglitz are lauding the measures taken by the US government to wrestle the economic downturn claiming that prolonged spending has held up economic growth at a time when private consumption and investment has fallen off a cliff, many experts across the globe dispute the efficiency of stimulus policies implemented by national governments worldwide.

 A preliminary report on Monday showed that inflation in the euro zone moved above zero in November for the first time in five months. Eurostat, the European Union’s statistical agency, also reported that consumer prices in the euro area rose by 0.6 percent in November from the same month a year earlier.

As full estimates are scheduled to be published on December 16 the detailed report is no available yet.

 In an interview given to the Financial Times the top executive at the Federal Reserve stated that the central bank could remove part of its huge support to the US economy once the recovery becomes solid and monthly employment rates increase.

St. Louis Federal Reserve Bank President James Bullard said that he would not approve tightening the monetary policy unless the recovery achieves its stable stage.

 In the transcripts of a speech to be carried at the Israeli Presidential Conference European Central Bank Governing Council member Axel Weber stated that the euro zone will unlikely experience the second recession after exiting it. He noted that there are no risks of price instability in the policy-relevant medium-term horizon.