U.S. inflation is likely to remain low for now, but policymakers will keep a close eye on potentially self-fulfilling consumer expectations for higher prices, a top Federal Reserve official said Monday.
"We're likely to continue to see a moderate pace of inflation," Atlanta Fed President Dennis Lockhart said at a business conference.
"The central bank in the United States (is) very, very focused not on current experience of prices but also the expectations of the public going forward."
In remarks that largely skirted the outlook for monetary policy, Lockhart focused on broad shifts in sentiment following the worst recession in generations.
He said the shock made consumers a lot more cautious about their spending. While negative for short-term economic growth, the pattern is healthy in the long-run, and should help to address international imbalances characterized by high savings overseas and excess spending at home.
"Consumer spending has been growing more slowly relative to income than it did before the recession," Lockhart told an audience of business executives at the Palm Beach Strategic Forum. "I expect that this more measured consumption behavior is likely to persist."
In the past, Lockhart has cited such caution as an impediment to economic expansion. But Thursday he pointed to the advantages of such a shift in behavior.
"A less consumption-dependent economy will help rebalance the country's external accounts," Lockhart said.
A similar adjustment is needed — and already under way — for a highly indebted U.S. government sector, Lockhart said.
"The public sector in the United States must stabilize its finances and reverse the accumulation of debt that has accelerated in recent years," Lockhart said.
In Washington, Democrats and Republicans continued to wrangle over the budget and the Congressional debt ceiling, a battle that threatens a shutdown of the federal government.
© 2017 Thomson/Reuters. All rights reserved.