Rosengren says inflation misses won’t derail rate hikes

The gradual rate hikes will continue even as inflation remains below the Federal Reserve’s 2% target, Federal Reserve Bank of Boston President Eric Rosengren said Friday.

“Recent forecast errors of inflation and unemployment have not been particularly large, and do not pose much challenge to continuing on the current path of gradual increases in the federal funds rate,” Rosengren told a conference in San Diego, according to prepared text released by the Fed. “Perhaps the bigger risk for short-run policy is the fact that the unemployment rate continues to fall further below sustainable levels, and will likely continue to do so going forward, risking the sustainability of the recovery.”

Rosengren said the Fed has an opportunity, as a result of prolonged low real interest rates, to adapt and “consider alternative monetary policy frameworks” to inflation targeting to avoid hitting zero lower bound, requiring nontraditional methods of adjusting monetary policy.

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Eric Rosengren, president of the Federal Reserve Bank of Boston, looks on as mortgagees arrive at a foreclosure prevention workshop sponsored by the Federal Reserve Bank of Boston and the New England Ptriots Charitable Foundation at Gillette Stadium in Foxboro, Massachusetts, U.S., on Tuesday, Aug. 12, 2008. The number of foreclosures in the U.S. are "growing," Rosengren said in an interview with Fox Business News. Rosengren speaks as some investors are hoping the worst of home-price declines and defaults on home-loans are in the past. Photographer: Neal Hamberg/Bloomberg News

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Monetary policy Federal Reserve Federal Reserve Bank of Boston FOMC
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