The Fed's Bullard thinks inflation is dangerously low

http://economy.money.cnn.com/2013/04/17/the-feds-bullard-thinks-inflation-is-dangerously-low/?iid=SF_E_River

According to the Fed's preferred measure, which strips out gas and food prices., the current inflation rate is 1.3% as of February. The Federal Reserve usually aims to keep inflation around 2% a year. Bullard said "If it doesn't start to turn around soon, I think we'll have to rethink where we stand on our policy."

Low inflation has many bad effects on the economy. For one thing, it makes firms cut costs through different measures, for example: cut back in hiring. It also reduces spending as people are now less motivated to spend. Even worse is when deflation happens, which freezes spending completely since people rationally would not buy a product that is going to slide down the price ladder in a couple of months.

Bullard said he would push his Fed colleagues to ramp up their asset purchases if the inflation rate gets any lower. The Fed is currently buying $85 billion a month in Treasuries and mortgage-backed securities, in an attempt to lower long-term interest rates and stimulate more spending.