Fed's Pianalto: Inflation Trend Too High in Long Term

Inflation of around 3% in the United States since 2005 is too high for comfort in the longer term, Cleveland Federal Reserve President Sandra Pianalto said on Monday.

Her speech prepared for delivery to a Dublin financial conference was very similar to a speech in Frankfurt on June 6, where she also addressed the importance of keeping inflation expectations low.

"Expectations can become unglued under some circumstances, even if the current inflation measures appear contained," she said, according to a speech text released in advance.

Rising oil and commodity prices in particular brought a risk of eroding the public's trust and that inflation expectations would move higher, she said, although the Fed thought energy price impacts would dissipate over time.

"Since 2005, the three- to five-year moving average of U.S. inflation has hovered around 3%. This is above where I would like to see the trend settle in the longer run," she said.

Markets expect that the Fed will have to lower U.S. borrowing costs from 5.25% in the face of a housing market slowdown which is weakening the economy.