The U.S. Federal Reserve should shore up its ability to fight economic downturns...
The U.S. Federal Reserve should shore up its ability to fight economic downturns by committing to let inflation run above 2% “in good times,” a top policymaker said on Monday.
The comments by Eric Rosengren, president of the Boston Fed, echoed remarks made earlier in the day by another Fed policymaker who cited the U.S. economy’s falling a bit short on the central bank’s inflation target as a problem. The Fed’s preferred inflation measure, the core personal consumption expenditures price index, is currently at 1.8%.
“My own preference would be an inflation range,” because hitting the current target will only get harder with rates as low as they are, Rosengren said at Davidson College in North Carolina. “Even though we’re only missing by a little bit it actually does matter if you miss by a little bit on a regular basis.”
The president of the Chicago Fed, Charles Evans, said earlier on Monday that the U.S. central bank should embrace inflation above its target half the time and consider cutting rates if prices do not rise as fast as expected. Evans said the Fed will need to consider alternative inflation policy proposals before coming to conclusions about what changes to make.
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