Williams paints benign picture of Fed rate hikes, strong USA economy

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Federal Reserve officials puzzled by chronically-low United States inflation seem to agree on at least one thing: They worry, nearly universally, that they will lack the tools to fight the next recession, whenever it comes.

He said one possibility would be for the Fed to create a band that allowed US inflation to range between 1.5 percent and 3 percent.

Atlanta Federal Reserve Bank President Raphael Bostic to speak on "Economic Outlook and Monetary Policy" at the Rotary Club of Atlanta in Atlanta, with audience and media Q&A at 12.40 pm ET.

New ideas range from price-level targeting, to a temporary price level target, to an inflation target range rather than the current 2% goal.

The Federal Reserve aims to keep inflation rising at an annual rate of 2 percent.

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Currently, the Fed aims for USA consumer prices to rise 2 percent a year but the central bank has rarely met that target since adopting it in 2012, with inflation typically at less than 2 percent.

The decline pushed inflation even further away from the European Central Bank's policy goal of just below 2 percent.

"I'm not anxious about inflation suddenly taking off", he told Reuters over lunch during an American Economic Association conference in Philadelphia.

Bostic and Williams are both 2018 voting members of the Federal Open Market Committee, whereas Rosengren is not.

Former Bank of England policy maker Kristin Forbes said the Fed would probably have to pick up the pace of its rate hikes. but added that any speed-up would be from what has been a historically very slow tightening campaign.

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Summers argued the Fed will lack tools to fight the next recession, suggesting its bond purchases, known as quantitative easing or QE, did not work.

Starkly absent from the debate was the other side of the Fed's inflation mandate - full employment. Among that evidence is the low inflation rate itself, which reflects in part a lack of wage growth.

Median forecasts from Fed officials see three more hikes in 2018 as the tax stimulus, including cuts for corporations and individuals, seeps into the economy.

Maybe the next big Fed conference could focus on those issues instead.

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