U.S. Deflation Risk Seen Growing in Wells Fargo Model

The U.S. economy may prove more prone to deflation than the Federal Reserve acknowledges and that may present a reason to keep monetary policy loose, according to a model created by Wells Fargo Securities LLC.

Deflationary pressures have been “relatively high” since January 2010 and now have a 66 percent chance of prevailing in the U.S., according to Charlotte, North Carolina-based economists John Silvia, Azhar Iqbal and Blaire Zachary. Their calculations include factors such as the personal consumption expenditures price deflator, unemployment rate and the Fed’s inflation target.