Inflation Worries 'Unhinged,' Kohn Says; Fed Seeks Ways To Calm Consumers
Federal Reserve Board member Donald L. Kohn said yesterday that central bank officials will look for new ways to convince Americans that inflation will not take off.</br></br>Consumers' and investors' expectations of future inflation have risen slightly in recent months by several measures, raising concerns at the Fed that such perceptions might become self- fulfilling if they embolden businesses to raise prices, encourage shoppers to pay them and prompt workers to demand higher wages.</br></br>Consumers' expectations of future inflation eased a bit in early June from the end of May but remained slightly higher than in April, according to a University of Michigan survey released yesterday.</br></br>"Inflation expectations have come a little bit unhinged," Kohn said at an economic conference in Chatham, Mass., according to Bloomberg News. "It's not a big deal, but it has presented us with some issues."</br></br>Kohn alluded to Fed Chairman Ben S. Bernanke's promise to Congress that he would seek the support of his central bank colleagues to adopt a numerical long-term inflation goal, or target, as a way to keep inflation low and stable. For example, the Fed could publicly commit itself to keeping inflation close to 2 percent over two years, or 1 to 2 percent over some period. Currently, the Fed seeks "price stability," or low inflation, but doesn't define it with a number.