Q&A continues: - Q: If we get a negative........>

FED: Q&A continues:

- Q: If we get a negative CPI/PCE print, how should people think about that

deflation? Do you anticipate? 2nd, disconnect between markets and the economic

outlook right now, do you worry about financial stability problems down the road

with the size of stimulus being put in to the economy?

- A: There was concern during GFC we might see deflation but it didn't happen.

Inflation tended to move down as it does when demand is weak, but inflation

expectations did not move strongly down in the US. But has in other parts of the

world. As long as inflation expectations remain anchored, we shouldn't see

deflation. Low energy prices, would see through negative headline number.

- RE markets: our concern is that they are working, we are not focused on asset

prices - markets are trying to price in something that is unknowable and that is

very hard to do. Our measures have supported market function pretty well. People

not concerned about system collapsing as in 2008/09.