Federal Reserve Bank of Kansas City President Esther George said she’s opposed to cutting interest rates in order to raise inflation to the central bank’s 2% target, warning that could lead to asset-price bubbles and ultimately an economic downturn.

“Lower interest rates might fuel asset price bubbles, create financial imbalances, and ultimately a recession,’’ George, who votes on monetary policy this year, said Tuesday to the Economic Club of Minnesota. “In current circumstances, with an unemployment rate well below its projected longer-run level, I see little reason to be concerned about inflation running a bit below its longer-run objective.”

President Donald Trump and others in his administration have called for lower interest rates to create faster U.S. growth, while citing the lack of inflation to support their case for policy action. Some Fed officials, meanwhile, have separately made the case for the central bank to take steps to push price pressures back to goal, and financial markets expect a rate cut this year. Charles Evans, president of the Chicago Fed, said the central bank might want to consider cutting rates if inflation falls to around 1.5%.

George, among the most hawkish of the Fed’s 12 regional chiefs, rebutted such concerns.

“I am not convinced that a slight undershoot of inflation below objective requires an offsetting overshoot of the objective,’’ George said in the text of the Minneapolis speech. “The current level of inflation may perplex central bankers and financial market participants, but in the context of a growing economy and job gains, it doesn’t demand a Fed policy response.’’

Policy Framework

The Fed is considering possible changes to its policy framework as part of a yearlong review. Ideas to be debated include seeking inflation as an average of 2 percent over a period of time, where officials would deliberately allow price pressures to overshoot the target to make up for periods when inflation has been under 2%.

George said that when she talked to people or business owners they didn’t see low inflation as a problem.

Fed officials have signaled they don’t expect to raise or cut interest rates this year and have pledged patience before making any adjustment to policy, an approach that George praised.

“This wait-and-see approach is appropriate because we have not seen upward pressures building on inflation, even though we have experienced above trend growth and a further tightening of labor markets,’’ she said.

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