Washington, July 30: Federal Reserve officials are pleased to see hints of vigor in US economic statistics, but they are guarded about predicting a recovery that is brisk enough to outdistance the threat of deflation. Policy-makers, who have already slashed interest rates to a 45-year low of 1 per cent, have seen false starts in the U.S. recovery before. That makes them wary of overconfidence but they do predict better growth in coming months.
"The chances for a fairly significant improvement in the second half I think are quite good," Fed Governor Ben Bernanke said in a recent interview.
But with inflation at very low levels, Fed officials still see a remote but real risk of deflation, a sustained drop in prices that would damage the economy.
"Given that we are at a low (inflation) level now, we just have to be very careful not to get too low," Bernanke said.
A drop in a measure of consumer sentiment on Tuesday gave pause to some private economists. But other signs have been positive recently.
Bureau Report