BOSTON — Chicago Federal Reserve Bank President Charles Evans Saturday said the Fed shouldn't "obsess" over ungrounded fears of 1970s-style inflation to the point of stifling economic stimulus.

"We shouldn't base policies (based on inflation paranoia)," Evans said during a monetary-policy forum at the Boston Fed.

Evans noted that the Fed's stated 2% inflation goal "is not a ceiling (but) a target," and that price gains can "can drift above 2 percent without being at variance with our goals."

The fact that inflation appears more or less in line with the central bank's 2% goal "allows us to continue to consider further (stimulus)," the central banker said.

Minneapolis Fed President Narayana Kocherlakota, speaking on the same panel with Evans, said he endorses the Fed's recently released statement of how the central bank will balance its dual mandate of price stability and full employment.

"You're not focusing exclusively on the employment mandate (or) price stability in the mandate," he said. "You're balancing both."

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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