Summary Box: IMF sees higher deflation risk; Fed weighs new effort to aid economy
By APWednesday, October 6, 2010
Summary Box: IMF sees higher deflation risk
RISK GROWS: The International Monetary Fund says the risk of a destabilizing bout of deflation has increased.
WHY IT MATTERS: Deflation is a widespread and prolonged drop in the prices of goods and services, in the values of homes and stocks, and in wages. It crimps spending and makes it harder for people and companies to pay down debts. That hurts the economy.
HOW TO COMBAT: The Fed is keeping a key interest rate at a record low near zero. It also is considering buying government bonds to drive down interest rates on all kinds of loans. That would bolster the economy.
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