NEW YORK (Reuters) - It is “essential” that the U.S. Federal Reserve lift inflation to its 2% target over time in order to avoid the sort of “downward spiral” of low interest rates and growth that central banks in Europe and Japan have struggled with, Fed Governor Lael Brainard said on Tuesday.
“In the environment of ... inflation below target persistently ... it is absolutely essential that we do achieve our statutory goals. It is essential that we keep inflation anchored at 2%,” Brainard said during an appearance at the New York Association of Business Economics.
Brainard, a key member of the Fed’s board of governors, added that she hopes an ongoing review of the central bank’s strategy produces “a willingness to support average inflation outcomes of 2%, which after a period of undershooting would imply that inflation outcomes have to be somewhat above 2.”
Reporting by Howard Schneider; Editing by Paul Simao