MINNEAPOLIS: The US Federal Reserve does not need to change interest rate policy to push inflation back up to the central bank's 2 percent target, a Fed policymaker said on Tuesday.
Several US central bankers have expressed concern over persistently low US inflation and argued that interest rate cuts may be necessary.
But Kansas City Federal Reserve Bank President Esther George, a voting member this year on the Fed's rate-setting committee, described the undershoot as minor, especially given low levels of unemployment in the United States.
"With an unemployment rate well below its projected longer-run level, I see little reason to be concerned about inflation running a bit below its longer-run objective," George said in prepared remarks for the Economic Club of Minnesota.
US inflation has cooled over the last year and is currently below the Fed's 2 percent target.
After several years of slow interest rate hikes, the Fed has kept borrowing costs steady this year, in part because of cooled consumer prices.
George said she supports the Fed's current "wait-and-see" approach because of the lack of upward inflationary pressures.
"The current outlook for inflation appears to be benign," she said.
George argued against calibrating monetary policy to try to overshoot the Fed's inflation target in order to make up for past undershooting.
Rather, she said she sees a case for allowing inflation to deviate persistently from the central bank's target as long as it stays a half percentage point above or below it.
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