Urges Fed to hike and look past 2% inflation target
US Kansas City Fed Pres. Esther George is on the wires. George is not a voting member in 2017 or 2018.
She says:
- Fed should continue with gradual adjustment of rates
- Reasonable to expect inflation to gradually rise
- structural impacts on inflation may persist
- delaying adjustments could stretch productivity capacity
- Fed is meeting its dual mandate at historic standards
- Too much focus is placed on achieving the 2% inflation numerical target
- waiting for solid evidence that inflation will reach 2% before taking further steps to remove accommodation carries risks of overheating the economy, fostering financial instability, and perhaps putting in motion an undesirable increase in inflation
- it seems reasonable to expect that inflation will gradually rise as labor markets tighten further and the effects of past the low price declines, dollar appreciation and idiosyncratic price movements fade
- inflation has stayed below 2% target because of idiosyncratic shocks such as a decline in telecommunications and drug prices as well as structural factors including an aging population, global competition and Technological changes
- Labor market show limited slack and demographic trends are likely to result in labor force participation dropping, tightening labor market conditions further
- The feds 2% inflation target has proven to be far more challenging as a policy and in communicating to the public and deviations should be viewed in a broader context
