“This indicates that consumers may have digested delayed tax rebates and the increase in payroll taxes and are reaping the benefits of lower gasoline and food prices,” he said. “So the recovery presently appears to be strong enough to propel hopes that employment growth will continue improving over the near term.”
Inflation reports have been benign, with price measures likely to end the year between 1.5 percent and the Fed’s 2 percent goal, Fisher said.
Labor Department figures today showed the cost of living fell in April for a second month, the first back-to-back declines in inflation since late 2008, as fuel prices retreated. The consumer-price index decreased 0.4 percent, the biggest decrease since December 2008, after falling 0.2 percent in March.
Further Decline
Some Fed officials, including St. Louis Fed President James Bullard, said last month that a further decline in inflation that persisted might warrant additional stimulus. Consumer prices rose 1 percent in March from a year earlier, the lowest level since October 2009, according to the Fed’s preferred gauge of inflation.
Inflation that has “persistently” stayed below the Fed’s goal is a concern and may suggest policy hasn’t done enough to support growth, Boston Fed President Eric Rosengren said today.
“The longer we in the U.S. remain so far below our 2 percent target, the greater the risk that inflation expectations could fall and real interest rates rise,” Rosengren said in a speech in Milan. Low inflation and high unemployment “could lead one to argue that policy has not been sufficiently accommodative.”