Fed banker says inflation exceeds his 'comfort zone'


SEOUL, South Korea -- The president of the Federal Reserve Bank of St. Louis said yesterday that U.S. inflation is too high and that the Fed may need to act should price increases accelerate.

"Core inflation is modestly above what many of us have expressed as our comfort zone," William Poole told reporters in Seoul. "It's certainly my view that if the inflation rate continues to be persistent like that, the Federal Reserve will simply have to pursue" policies to keep inflation from growing.

Poole's remarks follow those of Fed Chairman Ben S. Bernanke, who said Thursday that energy prices are fanning inflation in the world's largest economy.

At least nine central bankers have expressed concern about prices in the past two weeks, suggesting more rate increases are in store. The Fed's rate-setting committee has raised a key interest rate at every meeting for two years, bringing it to 5 percent from 1 percent.

An increase at the Fed's June 28-29 meeting is almost certain. The Federal funds futures rate for July was 5.27 percent on overnight trading yesterday.

A federal report Wednesday showed that core rate of inflation, excluding volatile food and energy prices, rose 0.3 percent in May, exceeding economists' forecasts for the third straight month. The annual rate of inflation, including food and fuel, was 2.2 percent.

"There's still several weeks' worth of information and a lot of expert analysis of the information we have, and I have a very open mind about the conclusion of that meeting, or what my position will be going into that meeting," Poole said, referring to the rate-setting panel's meeting.

Pool is an alternate but not a voting member of the panel, the Federal Open Market Committee.

The Fed cannot allow the economy to expand above its potential "for some time" without igniting a sustained increase in inflation, Fed Gov. Donald L. Kohn said in a separate speech yesterday in Massachusetts.

Fed Gov. Randall S. Kroszner told reporters in New York that the inflation rate is in a range that "is manageable."

Both Kohn and Kroszner are members of the Fed's rate-setting panel.

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