A top Federal Reserve official has said the US is in danger of 'Japanese-style' deflation like that seen in the Asian giant's 'lost decade'.
James Bullard, who votes on the interest rate-setting Federal Open Market Committee, said US authorities should consider restarting crisis-era purchases of government debt to boost economic activity and avoid that fate.
His comments, made in a paper on the economy, appear to go beyond those of Fed chairman Ben Bernanke, who recently said it was 'prepared to take further policy actions as needed', but stopped well short of saying action was imminent.
Recent economic figures in the US have shown that the economic recovery has been losing steam in recent weeks.
There was some brighter news today, however, as new claims for US unemployment benefits fell unexpectedly last week to 457,000, down 2.4% from the previous week.
The Labor Department said jobless claims fell by 11,000 in the week ending July 24, down substantially from the 464,000 level expected by analysts. The jobless figures were lower, in part, thanks to fewer layoffs at car plants in Michigan and New York.
But according to the figures, some 4,565,000 Americans still asked for government aid to get by in the week ending July 17, up 81,000 compared to the previous week, according to seasonally adjusted statistics.
The bleeding continued elsewhere, with California seeing 20,000 more claims. A Labor Department economist said the rise came amid layoffs in the service industry.
The report also showed that while unemployment levels remain stubbornly high, claims are substantially down from this time last year, when they hit 578,000.
