By keeping short-term rates at zero, the Federal Reserve risks future inflation, a top Fed official warned Thursday.
Speaking in Washington, Federal Reserve Bank of St. Louis President James Bullard said the economy was nearly back to “normal” and that “there is no reason to continue to experiment with extreme policy.”
By keeping short-term interest rates near zero for seven years, Bullard said, the central bank has put the economy at “considerable risk of future inflation.”
He issued the warning although annual inflation has been running close to zero in recent months and the Fed is expected to raise its short-term interest rate target at its next meeting in December.
Bullard made his comments as asides during a speech at the libertarian Cato Institute in Washington that speculated on whether the Fed could actually bring inflation down over the long run by keeping interest rates low. The Fed targets 2 percent annual inflation.
Bullard is not a voting member of the Fed’s monetary policy committee this year but is due to rotate into a voting spot next year.
