Fed's Poole Expects Inflation Will Likely Fall This Year

Saint Louis Federal Reserve Bank President William Poole on Friday said inflation looked set to moderate this year amid solid growth and that he would press for policy action if it did not do so.

"Recent inflation data themselves and other information relevant to judging the inflation outlook suggest that the inflation rate is likely to fall into a reasonable range this year," Poole told a business group.

"If, however, core inflation seems to be settling at a rate above 2%, then such an outcome would be unacceptable to me. I put a very high weight on the Fed's responsibility to maintain low and stable inflation," he said.

Poole is a voter this year on the Fed's policy-setting Federal Open Market Committee.

Inflation has eased on a sharp fall in energy prices, but core prices, which strip out volatile food and energy prices, have been slow to come down under 2%.

Poole made plain he would back rate hikes to get inflation down, if needed. He also gave a nod to his preference for a Fed inflation target of 1.5% as measured by the core personal consumption expenditures, or PCE, price index.

"My commitment, certainly, is to do what I can to promote policy adjustments that will yield an inflation outcome, on average over a period of several years, centered on 1-1/2% on the core PCE price index," he said.

Policy-makers are examining whether adopting a formal price target would help their communication and policy strategy.

Poole, like Fed Chairman Ben Bernanke, is a vocal advocate of employing a numeric target to guide action.

Answering an audience question, Poole said U.S. capital markets were increasingly attractive and that it was unlikely foreign investors would flee and spark a financial crisis.

"As long as that situation remains that way, there is no reason for the crisis that you are talking about to occur," he said.