Kohn: 2 pct inflation goal gives Fed flexibility

NASHVILLE, Tenn, April 18 (Reuters) - A Federal Reserve policy aimed toward an inflation rate of 2 percent, rather than something lower, gives the U.S. central bank more breathing room at times of economic shocks, the Fed's vice chairman said on Saturday.

Donald Kohn, the Fed's No. 2 official, was quizzed by Paul Volcker, a former Federal Reserve chairman and now an economic adviser to President Barack Obama, about the central bank's inflation policies after a speech to a conference at Vanderbilt University in Nashville, Tennessee.

Kohn said while he does not expect to see deflation in "the next five years," he could not say the risks are "zero."

In its ongoing efforts to help boost the housing market, Kohn said the Fed is considering including jumbo mortgage loans in its newest lending program, the Term Asset-Backed Securities Loan Facility. (Reporting By Ros Krasny and Kristina Cooke; Editing by Leslie Adler)