By Lindsay Dunsmuir
LOUISVILLE, Ky. (Reuters) - The Federal Reserve should keep its benchmark interest rate at current levels until there is an upswing in inflation, St. Louis Fed President James Bullard said on Tuesday.
"Inflation data during 2017 have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target," Bullard said in a speech during an appearance in Louisville, Kentucky.
He added that even if the Fed does manage to return inflation to its 2 percent inflation target, it would not happen before 2018 or 2019.
The U.S. central bank has raised interest rates twice this year and appears on course for another upward move in December despite persistently weak inflation.
Bullard has repeatedly said raising interest rates again in such an environment risks harming the economy.
"The main concern I would have is that we raise rates in December and inflation expectations fall... which would in my view be a vote of no confidence from markets," Bullard told reporters.
The Fed's preferred gauge of inflation currently stands at 1.3 percent and has undershot the central bank's 2 percent for 5-1/2 years.
Bullard, who regains a vote on the Fed's policy-setting committee in 2019, said he expects economic growth for the second half of 2017 to exceed expectations but that it will then resume a slower path next year.
He also praised Fed Governor Jerome Powell, who was nominated earlier this month by President Donald Trump to replace Chair Janet Yellen, whose four-year term as Fed chief ends in early February 2018.
"He's a quick study and he's also shown a lot of political acumen within the Fed and his ability to get along with everyone, which I think is one of the key things you need as chair," Bullard said.