Inflation is not in danger of rising out of control and the Federal Reserve is not going to cut off the economic recovery, a top official said Tuesday.
“The risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem,” said William Dudley, the president of the Federal Reserve Bank of New York, speaking at an event in New York City.
Economic recoveries, he explained, “don’t simply die of old age.” At seven years and seven months long, the current recovery is already longer than the average post-World War II recovery, which lasted just under five years.
Instead, recessions usually begin either when inflation rises high enough that the Fed is forced to respond by raising interest rates and slowing spending or when some sort of shock hits the United States.
Inflation has been running at 1.7 percent annually in the gauge the Fed favors, stripping out food and energy prices. That’s below its 2 percent target. Adding in food and energy prices, inflation is even lower, at 1.4 percent.
