Washington, DC, Apr. 16--A Federal Reserve governor said strong productivity growth and continued slack in the economy should restrain inflation for the next couple of years.
The Fed's Ben Bernanke said there hasn't been enough data to change his views on low inflation despite the consumer-price report for March showing the strongest gain in core inflation, which excludes food and energy prices, since November 2001.
Bernanke, who is more sanguine about the inflation outlook than some of his Fed colleagues, said a large output gap--the difference between what the economy can produce and what it is producing--has been a good indicator of low inflation. As the gap shrinks, there is more uncertainty about whether there is slack in the economy. It then becomes a trickier indicator, he said.
"It's early to say whether or not there's been significant movement in what we should be forecasting for inflation a year from now," Bernanke said after a speech in Chicago.
Concerns about accelerating inflation would cause the Fed to move quickly to raise its interest-rate target above the current 1%.
