Debating deflation; A few years ago, while the Fed fussed about inflation, a local economist argued that deflation was the more serious threat. Now they've flipped positions.(BUSINESS)

From: Star Tribune (Minneapolis, MN) | Date: May 14, 2003| Author: | Copyright information

Byline: Mike Meyers; Staff Writer

The outlook for consumer prices lately seems to be zigging and zagging. But Federal Reserve officials are zigging while most economic forecasters are zagging.

In 1999 and early 2000, the Fed raised short-term interest rates six times for fear that a hot economy was kindling a fresh round of inflation. Economist Jim Paulsen thought the central bank was throwing too much cold water too fast.

Deflation, a persistent and widespread drop in prices, was more of a threat than inflation, wrote Paulsen, chief investment strategist with Wells ...

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