January 5, 2018 / 5:38 PM / in a month

Fed's Mester says U.S. economy firm, inflation to rebound

PHILADELPHIA (Reuters) - The U.S. economic expansion is firm and inflation, while low, should rebound in coming years, so the time is right for the Federal Reserve to study alternatives to its policy approach, a top Fed official said on Friday.

Cleveland Fed President Loretta Mester said she was not endorsing a change to the U.S. central bank’s inflation-targetting regime, in which it always attempts to hit 2 percent irrespective of past performance. But it is “legitimate” to consider alternative approaches, she said, adding her voice to those of several of her colleagues in recent months.

Mester, who votes on Fed policy this year under a rotation, did not comment explicitly on pending interest-rate hikes. She backed the Fed’s three hikes in 2017, and the central bank expects about three more this year.

The U.S. “economic expansion is firmly in place, labor markets are strong, and I expect that inflation, which has been running under our goal for quite some time, will return to our 2 percent goal on a sustained basis over time,” said Mester at the American Economic Association conference.

Reporting by Jonathan SpicerEditing by Chizu Nomiyama

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