Federal Reserve Governor Daniel Tarullo told CNBC on Friday he wants to see more evidence of sustained inflation before considering an interest rate increase. But he added he can't rule out a hike this year.
Tarullo, a voting member on the central bank's policymaking panel, said because of false starts on inflation, he'd like to see a rise in personal consumption expenditures closer to the Fed's 2 percent target. "We're not running a hot economy," he said.
He said the economy also has room to create jobs, when considering the unemployment rate has been rather steady while nonfarm payrolls have increased, presumably drawing on slack in the employment market. "No one knows where full employment is," he said.
"Over the last year ... the unemployment rate has remained just about stable, while we've had about a million jobs above the replacement needs," he added. "Remember our mandate is maximum employment not some constructed view of full employment."
Tarullo said investors should look at the big economic picture, not just each economic report, and that the Fed needs to look forward, not backward, when considering monetary policy.