Fed's Williams sees big costs to boosting inflation

DANA POINT, California (Reuters) - Boosting inflation purposefully to prod people into spending more would hurt the economy much more than it would help, San Francisco Federal Reserve Bank President John Williams said on Friday.

The positive effects of such an effort "would be modest," Williams said after a speech to the California Bankers Association. "The potential costs would be quite significant."

Nobel-Prize winning economist Paul Krugman has advocated pushing inflation up in order to boost the recovery. The Fed targets a 2 percent annual rate of inflation.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)