Kansas City Fed Chief Says Central Bank Must be 'Vigilant' on Inflation
Inflation measures remain relatively stable, but the Federal Reserve needs to move to raise interest rates if price pressures increase quickly, a top Fed official said on Monday.
"I don't think inflation is a risk today," said Kansas City Federal Reserve Bank President Esther George in response to a question after delivering a speech in Albuquerque, New Mexico. "But it's the one thing the central bank must keep its eye on. We must remain vigilant on that front."
George, who does not have a vote on the Fed's policy-setting committee this year, has consistently called for tighter monetary policy even as the Fed expanded its stimulus over the last few years. On Monday, George repeated her view that the Fed needs to move sooner rather than later to raise interest rates.
The Fed has kept short-term interest rates near zero since 2008, and has quadrupled its balance sheet to $4.5 trillion with purchases of bonds aimed at pushing down borrowing costs further.
George said that certain measures such as food, energy and rent are bearing down hard on consumers. But she added that on the whole, inflation is at stable levels, though she added that just because prices are muted does not mean they cannot suddenly rise.
Waiting to raise interest rates until after inflation moves beyond the Fed's 2 percent target would be a mistake and disruptive to the markets, George said.
"If we continue to wait to see full inflation, I think we risk having to move faster and steeper" with interest rate hikes, she said.
Subscribe to Latin Post!
Sign up for our free newsletter for the Latest coverage!