A top Federal Reserve official suggested Friday that there may not be enough evidence of strong economic growth for the central bank to raise its interest rate target when members meet next week in Washington.
Daniel Tarullo, a member of the Fed’s Board of Governors, cited years of below-target inflation and slow progress on unemployment as reasons for the Fed to be cautious.
“From my point of view, what is optimal right now is to look to see actual evidence that the inflation rate would continue to go up and to be sustained,” Tarullo said when asked about monetary policy in an interview on CNBC.
Tarullo’s comments suggest that the Fed will have a live debate next week as it determines whether to raise short-term interest rates, a decision that will affect rates across the board, such as business loans, mortgages and credit cards.
Some officials at the central bank appear ready to resume raising rates, after putting off doing so since December. On Friday morning, Federal Reserve Bank of Boston President Eric Rosengren said there was a “reasonable” case for doing so.
But Tarullo indicated that he was not convinced, raising the question of whether he might dissent from a decision by the committee to raise rates. Another official who recently has been skeptical of raising rates, Governor Lael Brainard, is scheduled to speak about monetary policy Monday, just before a self-imposed blackout on talking about rates before a meeting goes into effect.
Tarullo outlined a concern that raising rates could further slow economic growth and that doing so is not justified given that there is little evidence that the economy is overheating.
Inflation, he noted, has run below the Fed’s 2 percent target for years, and it is not clear, in his view, that it will hit that target soon.
And the unemployment rate, he added, has been “flat” recently. At 4.9 percent, it hasn’t fallen below its January level.
“From my personal perspective, I think we have an opportunity to get employment gains in this country,” he said.
“I don’t think anyone really knows where full employment is,” he later commented.
