Inflation may overshoot target: US Fed’s Williams

Washington (AFP) – Inflation in the world’s largest economy may overshoot the US central bank’s two percent target but this is not necessarily cause for concern, a key policymaker said Friday.

San Francisco Federal Reserve Bank President John Williams, who will soon take up the influential leadership of the New York Fed, said the key factor was that inflation average two percent over time.

He echoed the Federal Reserve’s statement this week stressing that the inflation target was “symmetric.”

“From the beginning, we’ve seen our inflation target as being a symmetric one, where we want inflation to be on average around two percent, sometimes above, sometimes below,” Williams told CNBC.

The Fed’s preferred inflation measure hit the target in March for the first time in over a year.

“I am personally comfortable with the fact that inflation may overshoot that two percent for a while,” Williams said.

Economists expect a tightening labor market this year will drive it higher, a prospect that has seen stocks tumble since February due to fears the Fed might raise the benchmark lending rate more aggressively.

But Williams said the expectation of three or four rate hikes this year is about right, and in line with the Fed’s plan for gradual increases.

Meanwhile, outgoing New York Fed President William Dudley said he was happy with inflation, as the Fed’s post-crisis stimulus efforts had at long last helped push inflation back towards the Fed target.

“Now I wouldn’t quite declare victory yet,” Dudley told Bloomberg. 

“I mean the inflation data goes up and down month to month but we’ve made some progress and I’m certainly happy where we are today.”