Fed’s Kaplan sees risk of inflation gaining a foothold in U.S. economy

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Dallas Federal Reserve Bank President Robert Kaplan speaks at the Commonwealth Club in San Francisco, U.S., October 11, 2019. REUTERS/Ann Saphir

Dallas Federal Reserve President Robert Kaplan on Friday raised the prospect of a worrisome rise in U.S. inflation expectations, as imbalances between supply and demand for labor and goods put upward pressure on prices.

Most U.S. central bank policymakers see the upward pressure – evident in a 4.2% jump in annual consumer prices last month – as transitory, expecting supply chains to eventually catch up to higher demand, more workers to return to the labor force as the rollout of COVID-19 vaccines alleviates safety concerns, and working parents to have more flexibility as more schools and childcare facilities reopen.

The spending boost helping fuel price hikes will subside, they believe, once extra savings are gone and government checks are spent. Imbalances also will ease, preventing any permanent shift upward…

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