MNI: Fed's Williams And Dudley Comfortable With Inflation

--In Broadcast Interviews, Reiterated Fed Has A "Symmetric" 2% Infl Objective

By Sara Haire

     WASHINGTON (MNI) - The FOMC's Wednesday statement caused speculation on

what the addition of "symmetric" might mean when discussing inflation

expectations running near the Committee's 2% objective, something two top

Federal Reserve officials explained on Friday was an indication of their

comfortability with allowing inflation to drift above target for some time.

     San Francisco Fed Bank President John Williams and New York Fed chief Bill

Dudley said in separate, dueling televised interviews on CNBC and Bloomberg,

respectively, that inflation has been moving closer to the Fed's goal and it was

time to reiterate that the Federal Open Market Committee's objective is

"symmetric."

     "Given that inflation has been below our target for a number of years, I

think it is important to reinforce that message that we think of 2% as the

midpoint, and I am personally comfortable with the fact that inflation may

overshoot that 2% for a while," Williams said in an CNBC television interview.

     Meanwhile in a separate interview, Dudley brushed off the idea that the

added 'symmetric' was any cause for concern. He explained that as he has said a

number of times, that being "a little above 2% after being below for many years

is not a problem," and continued on to explain that the 2% was not a floor nor a

ceiling, despite the markets' voiced concerns.

     Prior to this in a speech on April 18, Dudley addressed the idea of a

target inflation range being more practical considering inflation "will

fluctuate relative to its underlying trend," implying that even if the FOMC is

perfect in policy implementation, the inflation rate "will very rarely" be

precisely at 2%.

     The reiteration that the Fed's objective remains symmetric would suggest

that at least a few members of the FOMC seem to be on board with allowing the

economy to run above trend for the time being, careful to monitor economic and

inflation developments closely as the year progresses.

     Williams will be assuming the role Dudley will be retiring from shortly, so

their agreement on allowing inflation to fluctuate bodes well for the continuity

of the Fed leadership.

--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

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