BOSTON (MNI) - Federal Reserve Bank President Charles Evans Saturday said the Fed shouldn't "obsess" over ungrounded fears of 1970s-style inflation to the point of stifling economic stimulus.
"Most inflation-risk discussions ultimately raise the specter of: 'Well, inflation's not high right now, but I worry that we're going to unlock the long-ago-vanquished inflation demons from the dungeon,'" Evans said during a symposium at the Boston Fed.
"That's something we must be mindful of, but ... I don't think we should obsess over (inflation fears)," he said. "Inflation has been low, and we shouldn't craft restrictions to optimal policies to reflect asymmetric worries as if our inflation performance has been worse than it has been."
Evans noted that the Fed's stated 2%R inflation goal "is not a ceiling (but) a target," and that price gains "can drift above 2% without being at variance with our inflation goals. That allows us to continue to consider accommodative monetary policies."
The central banker also hinted that he's less worried about inflation and more concerned about the U.S. economy's "extended unemployment and weak growth."
"(Those) have large social losses. Those are important to avoid," he said. "What really worries me is the risk that we could become more like Japan than not."
Minneapolis Fed President Narayana Kocherlakota, speaking on the same panel, told the forum that he endorses the Fed's recently released statement of how the central bank will balance its dual mandate of price stability and full employment.
"You're not focusing exclusively on the employment mandate (or) price stability in the mandate," Kocherlakota said. "You're balancing both."
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