James Bullard

As the Fed's rate-setting committee prepares to announce its latest decision today, it faces a weakening economy and the growing threat of deflation. And it has to combat these potential menaces with interest rates already set near 0%. Here's a look at its options.

In a paper titled "Seven Faces of the Peril," St. Louis Fed chief James Bullard lays out two possible paths for the U.S. economy. One is that the country falls into a Japanese-style, years-long rut of deflation.

James Bullard, president of the St. Louis Federal Reserve Bank, said the global economic recovery looks "very strong," despite concerns over slower growth in China and the European debt crisis. "The global economy is now in the middle of a powerful recovery led by Asia," Bullard said in a speech...