November 21, 2013 / 5:31 PM / 4 years ago

U.S. inflation to trend higher but needs close watching: Fed's Lacker

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, participates in a session titled, "Help or Harm: Central Bank Monetary Policies at the Outer Limits" NABE Economic Policy Conference in Washington March 5, 2013 file photo.Yuri Gripas

ASHEBORO, North Carolina (Reuters) - The U.S. inflation rate is likely to move closer to 2 percent over the next year or two although uncertainty over this view will warrant careful monitoring by the central bank, a top Federal Reserve official said on Thursday.

Some measures of annual inflation have trended well below the Fed's 2 percent target in recent months, a potential sign that demand in the economy is dangerously low.

Some policymakers have expressed concerns over cool rates of inflation, but Richmond Fed President Jeffrey Lacker said price gains were likely to accelerate.

"My sense is that inflation will move back toward 2 percent over the next year or two, in part because measures of expected inflation remain well contained," Lacker said in prepared remarks for a business conference.

"This is not a certainty, however, and I believe the (Fed's policy-making committee) will want to watch this closely."

Lacker is not a voting member this year on the Federal Open Market Committee, though he said he remains opposed to the Fed's current policy of buying $85 billion in bonds every month to try to stimulate the economy.

Lacker said such stimulatory programs do little good for the U.S. economy's structural ails. He said productivity growth is likely to remain low at around 1 percent "for a considerable period." Lacker said he forecasts economic growth in 2014 of just above 2 percent.

Reporting by Jason Lange; Editing by Krista Hughes

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