Remember inflation? In a Shift, Fed Signals Concern Over Deflation in Its Statement:
But in the past few years, as underlying inflation fell below 2% for the first time since the 1960s, Fed officials began to realize that it could go too low. In the past six months, underlying inflation has been running at just 1% based on the Fed’s preferred measure, the price index of personal consumption excluding food and energy.When inflation is close to zero, an unexpected shock or prolonged period of economic weakness could push the economy into outright deflation, that is, generally declining prices. Deflation weakens the Fed’s ability to boost spending because interest rates can’t go below zero. Deflation also makes it harder for businesses and individuals to repay debts because their incomes fall while their debts are fixed.
Most Fed officials think deflation is highly unlikely, but they have been sensitized to its dangers by Japan’s battle with deflation, which has crippled its economy and weakened its banking system.
I can remember when everyone complained about inflation. According to the article’s graphic, inflation almost hit 10% in the late 70s and early 80s.