MNI POLICY: Fed Won’t Hit Inflation Bar For 2 Years- Rosengren

Boston Fed President Eric Rosengren said Tuesday he does not expect the U.S. economy to reach a sustained 2% inflation rate over the next two years despite employment gains, implying the Fed will continue to maintain very accommodative interest rates.

Over the medium term Rosengren expects a decline in the unemployment rate and a "robust recovery starting in the second half of this year." The economy is supported by elevated household savings, favorable financial conditions, and a resilient housing market, he said.

There could also be a drag on the recovery from labor market scarring and the appearance of problems in commercial real estate that are likely be fully revealed later this year, he said.

It will be appropriate to keep interest rates at near-zero through 2021, Rosengren said, and the Fed "will continue to purchase long-term assets until the economy is on a stronger economic footing," echoing recent FOMC guidance.

Recent indicators suggest "near-term problems" in the economy "stemming from elevated infections and persistent public health concerns," adding that "to date, the inoculation rate has been disappointing," the Fed chief said in prepared remarks for a Greater Boston Chamber of Commerce event.