HELENA Mont. (Reuters) - U.S. inflation looks set to stay below the Fed's 2-percent target until 2018, a top Federal Reserve official said on Thursday, a sign that the country is not taking full advantage of its resources.
It is a very different picture from the too-high inflation that plagued policymakers 40 years ago, Minneapolis Federal Reserve President Narayana Kocherlakota said in brief remarks before a town hall at Carroll College in Helena, Montana.
Back then, U.S. President Henry Ford launched an anti-inflation campaign and commissioned Meredith Willson to write a song to go with it. "Who needs inflation? Not this nation," went the song, as quoted by Kocherlakota.
"Mr. Willson?s pithy characterization was spot on in 1974," Kocherlakota said. "But 40 years later, I would suggest that it?s exactly backward. Right now, this nation needs more inflation."
Kocherlakota is a voter on the Fed's policy-setting panel this year and has argued forcefully that the Fed should do more to try to bring inflation up and unemployment down. Still, it is unusual for a central banker anywhere to baldly declare a need for inflation.
Kocherlakota, though, is convinced that worrying about too-high inflation, as some of his colleagues at the Fed have done, is simply wrong.
"It?s critical for monetary policymakers like myself to realize that the times, and challenges, that we face are different from the ones that Mr. Willson wrote about back in 1974."
(Reporting by Nathan Kavanagh; Writing by Ann Saphir; Editing by Cynthia Osterman and Lisa Shumaker)
