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WASHINGTON (AP) — It might seem like prices are rising wherever you look, from medical care to college tuition. Yet to the Federal Reserve, they might not be going up fast enough.
The Fed says a little more inflation might be just the thing to start a chain reaction that would ultimately create jobs — and avoid a spiral of falling prices that could damage the economy.
In a statement Tuesday, the Fed avoided directly mentioning the dreaded word "deflation." But it signaled its concern that today's very low inflation might lead to actual price drops.
The Fed, meeting for the last time before the midterm elections, said its measures show inflation is "somewhat below" desirable levels for the economy. That may sound strange, because inflation is often made out to be an economic evil.
And it can be, when it gets out of control. But its opposite can be even worse.
Once deflation takes hold, it can wreck an economy. Workers suffer pay cuts. Corporate profits shrivel. Stock values fall. People, businesses and the government find it costlier to pare debt. Foreclosures and bankruptcies rise.
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