Investing.com - Federal Reserve Board Vice Chair Stanley Fischer made a case Tuesday night for overshooting on its employment mandate in order to foster higher inflation.
Fischer, in a speech prepared for the IHS Energy CERAWeek conference in Houston, suggested a tradeoff may be appropriate with the FOMC allowing the labor market to run a little hot in order to boost inflation towards the Fed's 2% target.
"Most estimates of the full employment rate of unemployment are close to 5%," he pointed out. And with the unemployment rate measuring 4.9% in January, the Fed is close to achieving its goal of maximum employment.
"A modest overshoot could actually be helpful in moving inflation back to 2% more rapidly."
He did not indicate his preference for another rate hike following the December decision to lift rates off the zero lower bound where they had been for seven years.
"I expect most of you are less interested in what we did at our previous meetings, and more interested in what we are going to do at the next one," Fischer said. "I can't answer that question because, as I have emphasized in the past, we simply do not know."
Fischer, who as a governor votes at each FOMC meeting, said, "The world is an uncertain place sometimes more uncertain than at other times - and all
monetary policymakers can really be sure of is that what will happen is often different from what we currently expect."