USA inflation expectations edge up: New York Fed survey

Ian Spreadbury The long road towards policy normalisation

US Fed officials expect gradual rate hikes ahead

He added that even if the Fed does managed to return inflation to its 2 percent inflation target, it would not happen before 2018 or 2019.

He expected that the economy would continue to grow "a bit above 2 percent" in the foreseeable future, and the unemployment rate would remain around 4 percent.

Robert Kaplan, president of the Federal Reserve Bank of Dallas, also said on Tuesday that tight US labor market called for the central bank to "patiently, gradually" tighten its monetary policy despite the persistent low inflation. The central bank has nonetheless raised rates four times since late 2015 in a nod to strong employment and steady economic growth, and expects to tighten policy again next month.

The Fed's preferred gauge of inflation now stands at 1.3 percent and has undershot the central bank's 2 percent for 5-1/2 years.

The Federal Reserve should keep its benchmark interest rate at current levels until there is an upswing in inflation, St. Louis Fed President James Bullard said on Tuesday.

Bullard reiterated that inflation has surprised to the downside this year and that "inflation expectations remain below the level that would be historically consistent with the FOMC's inflation target".

The Fed is to hold a policy meeting on December 12-13.

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