Fed’s Fisher Says Inflation Very Low

U.S. inflation is only temporarily “very low” due in part to commodity prices, while the U.S. economy has nearly achieved full employment, Federal Reserve Vice Chairman Stanley Fischer said on Monday.

“A large part of the current inflation is temporary. It has to do with the decline in the price of oil; it has to do with the decline in the price of raw materials,” he said on Bloomberg TV.

“These are things which will stabilize at some point,” Fischer added, in comments that were careful not to tip his hand on when he thinks U.S. interest rates should rise.

“We are in a situation with … nearly full employment but very low inflation.”

The U.S. central bank has kept rates near zero since the depths of financial crisis in 2008, but could start tightening policy as soon as next month, given unemployment has fallen to 5.3 percent from a recessionary high of 10 percent.

The Fed’s preferred inflation measure is 1.3 percent, below its 2-percent target, which has sown caution among some policymakers.

Rates will not stay this low “forever, and we need to be looking ahead as we go,” said Fischer, a close ally of Fed Chair Janet Yellen. Employment has been “rising pretty fast … yet inflation is pretty low.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza