Global economic weirdness....

via Reuters.

The current level of U.S. prices is noticeably lower than what it would be if the Federal Reserve had delivered on its 2-percent inflation target, St. Louis Federal Reserve President James Bullard said, calling the trend "worrisome."

In slides prepared for delivery in Tokyo on Friday, the U.S. central banker said U.S. prices are now 4.6 percent below the price level path established from 1995 to 2012, when inflation was growing near the Fed's target of 2 percent each year.

"This is not as severe as the 1990s Japanese experience, but it is worrisome," said Bullard, who does not vote on U.S. monetary policy this year.

Too-low inflation has kept the Fed from raising rates more than three times since the Great Recession, but since late last year most Fed policymakers have seen faster rate increases ahead, citing improvements in the labor market.

Bullard also said he sees minimal impact on long-term bond yields from reductions in the Fed's balance sheet, which he hopes will start in the second half of this year.

Bullard, speaking to reporters after the speech, said it was good to cap the amount of mortgage-backed securities and Treasuries that are allowed to run off the Fed's balance sheet. However, he was indifferent to what the size of the caps should be.

The Fed is monitoring subprime auto and student loans but they are not near danger levels, he added.

U.S unemployment registered 4.4 percent in April, below what Fed officials believe is a sustainable level. Most Fed officials expect to raise the target interest rate three times this year, including the increase they made after their March policy meeting

But Bullard said that a surge in inflation is unlikely even if unemployment falls further.

We have full employment, have supposedly just recovered from a great recession, have low gas prices, and creditors are giving it away if you have a pulse and no inflation?

That's weird.

But wait it gets better.  Check out what's happening in China. via Reuters.

China's structural reforms will slow the pace of its debt build-up but will not be enough to arrest it, and another credit rating cut for the country is possible down the road unless it gets its ballooning credit in check, officials at Moody's said.

The comments came two days after Moody's downgraded China's sovereign ratings by one notch to A1, saying it expects the financial strength of the world's second-largest economy to erode in coming years as growth slows and debt continues to mount.

In announcing the downgrade, Moody's Investors Service also changed its outlook on China from "negative" to "stable", suggesting no further ratings changes for some time.

China has strongly criticized the downgrade, asserting it was based on "inappropriate methodology", exaggerating difficulties facing the economy and underestimating the government's reform efforts.

In response, senior Moody's official Marie Diron said on Friday that the ratings agency has been encouraged by the "vast reform agenda" undertaken by the Chinese authorities to contain risks from the rapid rise in debt.

However, while Moody's believes the reforms may slow the pace at which debt is rising, they will not be enough to arrest the trend and levels will not drop dramatically, Diron said.

Diron said China's economic recovery since late last year was mainly thanks to policy stimulus, and expects Beijing will continue to rely on pump-priming to meet its official economic growth targets, adding to the debt overhang.

Go here to check out the ratings chart (covers Moodys, Fitch and S&P).  What had me spinning was the idea that China had an "economic recovery" last year.  How did we miss that?  I thought if China caught a cold the rest of the world would get pneumonia!

Back on task.

Something weird is going on with the global economy.  Warning signs?  I won't even make that call (been wrong too many times) but you have to admit...this is a bit off.