WASHINGTON, Nov. 14 (Xinhua) -- Several U.S. Federal Reserve officials have expected that the central bank would continue gradual interest rate hikes amid low inflation and unemployment rate.
"I think it will be appropriate for interest rates to rise gradually over the next couple of years, as our policy position is still very accommodating rather than neutral," said Raphael Bostic, president of the Atlanta Federal Reserve Bank, at a forum on Tuesday.
He argued that a spike in demand could push the economy beyond its sustainable capacity, as the economy is nearing full employment.
"This would put pressure on labor costs, as businesses would have to compete more aggressively for an increasingly limited pool of available workers," said the Fed official who is to vote on the Fed's policy setting committee, Federal Open Market Committee (FOMC), next year.
He expected that the economy would continue to grow "a bit above 2 percent" in the foreseeable future, and the unemployment rate would remain around 4 percent.
U.S. jobless rate dropped to 4.1 percent in October, a new 17-year low, while the personal consumption expenditures price index, an inflation gauge preferred by the Fed, rose only 1.6 percent in September, far short of the Fed's 2 percent target.
Robert Kaplan, president of the Federal Reserve Bank of Dallas, also said on Tuesday that tight U.S. labor market called for the central bank to "patiently, gradually" tighten its monetary policy despite the persistent low inflation.
The official said in an interview with the Financial Times that he is "actively considering" backing another increase in short-term interest rates at the central bank's meeting next month.
Kaplan who votes on FOMC this year warned that an overheating job market might create imbalances and excesses in financial markets.
However, there are Fed officials who argued that the central bank should keep interest rates at current level in view of the low inflation.
"The current level of the policy rate is appropriate given current macroeconomic data," said St. Louis Fed President James Bullard at a forum on Tuesday.
Bullard reiterated that inflation has surprised to the downside this year and that "inflation expectations remain below the level that would be historically consistent with the FOMC's inflation target."
He downplayed the impact of tightening labor market on inflation and said that low unemployment readings were probably not an indicator of meaningfully higher inflation over the forecast horizon.
The Fed is to hold a policy meeting on Dec. 12-13. Market investors now widely expected that the central bank would raise interest rates again at the meeting.