Federal Reserve Bank of St. Louis President James Bullard said it is fair to say the world is entering a period of exceptionally low interest rates.
Speaking in New York, Bullard said the global recession will carry through until at least the first half of 2009. As for the U.S., he expects the first half of 2009 to see employment and output continue to deteriorate.
On inflation, Bullard said the risks of disinflation and even deflation are real, with core inflation close to zero. He noted that the Fed's recent efforts to expand its balance sheet have done nothing to prevent deflation.
January inflation results will be released in the U.S. on Friday. Economists expect core inflation to grow a meager 0.1%.
Bullard also said the Federal Reserve needs to find a way to keep monetary base growth rates high.
By Megan Ainscow and edited by Sarah Sussman
©CEP News Ltd. 2009