By Ann Saphir
(Reuters) - With wage growth slow, price rises muted and the outlook for longer-term inflation slipping, two top U.S. Federal Reserve officials want the central bank to defer interest-rate increases until next year.
"If we are going to get inflation up to our 2 percent objective ... we are going to have to see wages increase more," Chicago Federal Reserve Bank President Charles Evans told CNBC in an interview on Friday after a government report showed pay increases slowed in December, despite strong gains in jobs. "That's why I'm in favor of being patient on raising interest rates."
Evans, who has a vote on the Fed's policy committee this year, said his view that the central bank should not raise rates until 2016 stemmed from expectations that inflation will still take years to return to the 2 percent target despite what he called "good, good progress" on jobs.
Friday's jobs report showed average hourly wage gains at their slowest pace in more than two years.
"I'd like to have more confidence that we're going to get inflation to 2 percent," he said. "To get there, I think we need continued accommodation."
The Fed has kept short-term interest rates near zero since December 2008, and most central bank officials expect the economy to be strong enough this year to start raising them. Traders share that viewpoint, betting on Friday that the Fed will begin doing so in September.
Not Evans, who said Friday he did not want to see the United States look like Europe, where inflation is very low and dropping.
Late Thursday, Minneapolis Fed President Narayana Kocherlakota called for leaving rates where they are for at least another year. Like Evans, he also cited sluggish wage growth and stubbornly low inflation, along with rising bets in financial markets that the Fed will continue to miss its inflation target.
Traders "are betting more and more increasingly that inflation is going be low," Kocherlakota said. "They are thinking, 'Boy, the FOMC is not aiming at 2-percent inflation.'"
The U.S. bond market's measures on inflation expectations fell further after the jobs report.
Bets on inflation expectations have "moved down a lot," Evans said Friday. "That's either an assessment by investors that they are expecting continued very low, below-our-objective inflation ... or the cost of low inflation is potentially much higher than they've ever experienced before."
(Reporting by Ann Saphir; Editing by Chizu Nomiyama and Lisa Von Ahn)
