WASHINGTON (Reuters) - The Federal Reserve should consider changing its inflation target to allow for an acceptable range of inflation rates, Boston Federal Reserve President Eric Rosengren said on Monday.
Currently, the Fed aims for U.S. consumer prices to rise 2 percent a year but the central bank has rarely met that target since adopting it in 2012, with inflation typically at less than 2 percent. Rosengren said it was possible the optimal rate of inflation could shift with time.
“My own view is that we should be focused on an inflation range, with the potential to move within the range as the optimal inflation rate changes,” Rosengren said in prepared remarks at an event hosted by the Brookings Institution.
He said one possibility would be for the Fed to create a band that allowed U.S. inflation to range between 1.5 percent and 3 percent.
Rosengren said the optimal rate of inflation might not be 2 percent if achieving that requires interest rates close to zero. The Fed currently aims to keep overnight interbank lending rates between 1-1/4 percent and 1-1/2 percent.
A number of Federal Reserve policymakers in recent weeks have called for changes or urged study of the Fed’s inflation framework.
Earlier on Monday, San Francisco Fed President John Williams said the Fed could better fight a recession by committing to keep interest rates lower for longer to keep average inflation on a steady upward path over the years, a framework known as price level targeting.
Reporting by Jason Lange; Editing by Andrea Ricci and Diane Craft