Patrick Harker, president of the US Federal Reserve in Philadelphia, said Thursday the central bank needn’t worry about inflation getting in the way anytime soon.
In a CNBC interview in the past few days, Harker repeatedly asked Fed officials whether his simple monetary policy could increase price pressures and disrupt what he described as “a fairly troubled economy”.
Inflation remained well below the Fed’s traditional 2% target, with the January consumer price index confirming earlier this week that while some sectors of the economy are rising, the overall picture remains subdued.
“What I am seeing is not just the level of inflation, it is also accelerating or slowing down,” he said at the Closing Bell. “We are clearly committed as [a Federal Open Market Committee] exceed 2% for a certain period, but must be consistently above 2% for a certain period. “
The FOMC codified this commitment last year when it adopted a flexible average inflation control policy. This means that inflation can be above 2% for a while before the Fed steps in with rate hikes.
Fed officials believe that being able to make the economy hotter for a period of time will not only help lower unemployment from its current 6.3%, it will also make job growth more inclusive in terms of rate and income shape.
Harker said inflation could cause problems later but is not a factor right now.
“I don’t see it going over 2% anytime soon, so I’m not very concerned about that risk at the moment,” he said. “In the medium or long term, yes, of course, we have to take that into account. But not now.”
The Philadelphia Fed has partnered with the Cleveland Fed to introduce a tool called the Occupational Mobility Explorer. The tool aims to connect displaced people with jobs that require similar skills but pay more.
“I think this tool is incredibly powerful and the time to use it,” he said.