By Vicki Needham - 10/25/10 06:33 PM EDT
Concern over deflation had grown among economists in recent months with the weak economic recovery, high unemployment and the recent slowing of inflation. The slowing economic recovery could prompt the central bank to buy up more government debt, a decision expected to be made at its Nov. 2-3 meeting next week.
"However, the risk is lower if people expect inflation to remain stable at a positive rate," Christensen said in the letter. "A brief period of negative inflation like the one observed during 2009, which was largely a consequence of dramatic declines in energy prices, should not pose a risk to the economy as long as it is viewed as a temporary phenomenon that does not alter longer-term inflation expectations."