The Federal Reserve should wait to see more "tangible" evidence of sustained inflation before raising rates Federal Reserve Board Governor Daniel Tarullo said Friday.
But despite that, he wouldn't rule out a rate hike this year, Tarullo said in an interview on CNBC.
"There is room for a robust discussion" at the upcoming Federal Open Market Committee meeting. Tarullo said, "We're not running a hot economy" and the Fed doesn't have "as many tools to respond to a potential recession as we would if growth would pick up."
While many Fed officials say the economy is close to full employment, Tarullo said, "I don't think anybody really knows where full employment really is." Despite the millions of jobs added in the past year, Tarullo said, the unemployment rate "has been flat."
It is the unemployment rate and the suggestion by the Institute for Supply Management surveys, that in his opinion suggest weakness in the economy.
"We need to be focused on the overall picture" and determine the "momentum of the economy going forward," he said. Rates can't be based on what happened, they have to be based on where the economy is going in the future, he noted.
