Kansas City Fed President Esther George said over the week end that “the U.S. economy is currently in a good place, with low inflation, low unemployment and an outlook for continued moderate growth.” And, “in current circumstances, concern about low inflation seems unnecessary.”
She added, it’s more “realistic to accept that there will be both temporary and persistent fluctuations around” Fed’s 2% inflation target. And, “as long as they don’t exceed a reasonable threshold — perhaps as big as 50 or even 100 basis points — they should be tolerated, depending on broader economic conditions”.
“Should incoming data point to a broadly weaker economy, adjusting policy may be appropriate to achieve the Federal Reserve’s mandates for maximum sustainable employment and stable prices,” George said. But “trying to quickly return inflation to 2 percent by adjusting interest rates could require aggressive actions that would misallocate resources and create financial imbalances.”
