By Ben Leubsdorf 

JACKSON HOLE, Wyo.----The Federal Reserve shouldn't raise short-term interest rates this year and instead should consider easing monetary policy to bolster sluggish U.S. inflation, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Friday.

"It's definitely premature to be thinking about the removal of accommodation in the form of lifting off, at least based on my current outlook for inflation," Mr. Kocherlakota said in an interview on the sidelines of the Federal Reserve Bank of Kansas City's annual economic symposium here.

He said he doesn't see inflation returning to the Fed's 2% annual target until 2018. Given that outlook, he said, further easing is "worth considering, absolutely."

Mr. Kocherlakota, who will leave the Minneapolis Fed at the end of the year to join the faculty of the University of Rochester, has long argued the Fed should not raise interest rates this year.

Raising rates soon "would create profound economic risks for the U.S. economy," he wrote in a Wall Street Journal opinion piece earlier this month.

His comments Friday added to a wide range of views expressed in recent days by Fed officials on the path forward for rates, which have been pinned near zero since December 2008.

Most policy makers think the first rate increase will happen this year, and it could come as soon as the Fed's Sept. 16-17 policy meeting. But volatility in financial markets and worries about a slowdown in China have made some officials wary of moving next month.

That public dialogue, Mr. Kocherlakota said, is a good thing.

"Many public policy issues have this form of being technical, complicated issues that policy makers have to struggle with, and monetary policy is just another example," he said. "In a democracy like the one we have, I think it's totally appropriate for the public to be aware of what principles the policy makers are thinking about and talking through."

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

 

(END) Dow Jones Newswires

August 28, 2015 19:00 ET (23:00 GMT)

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