Federal Reserve nominee Marvin Goodfriend told lawmakers Tuesday he supports the central bank's dual mandate to maintain stable prices and pursue maximum employment, despite his past comments suggesting the Fed should focus on inflation.
Democrats pressed Mr. Goodfriend at his confirmation hearing to explain those comments, including remarks in 2012 in which he warned inflation could begin to rise dangerously if the Fed let the jobless rate fall below 7%. The unemployment rate in December was 4.1%, and inflation has continued to run below the Fed's 2% objective.
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Mr. Goodfriend, a former Fed economist and a professor at Carnegie Mellon University, said his comments were "academic," and said he has argued that price stability is essential for the Fed to pursue stimulative policies to help lower unemployment.
"I totally support it," he said of the central bank's dual mandate, adding that he regretted referring to the dual mandate as "incoherent."
Sen. Bob Menendez (D., N.J.) suggested Mr. Goodfriend had experienced a "confirmation conversion." He asked whether Mr. Goodfriend thought the Fed should have followed his advice to begin raising short-term interest rates in 2012.
"No, I don't," he said, but added that his remarks were being taken out of context.
"The history and the thinking about monetary policy has said if we want to get unemployment down to the natural rate...we as central banks need to stabilize long-run inflation expectations," he said. "That's all I'm saying."
Mr. Goodfriend also said he thought Fed policy was "more or less on the right path" and that inflation was slowly rising and could reach 2% in "a year or so."
Asked why he thought inflation was so low, Mr. Goodfriend said that is a puzzle around the world. He attributed it in part to global central bankers' commitment to keeping inflation expectations anchored, which he said had "cut off the inflation tail," as well as a long period of very low interest rates at several central banks.
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(END) Dow Jones Newswires
January 23, 2018 11:58 ET (16:58 GMT)