U.S. inflation expectations were very stable and well-anchored at a low level despite pronounced swings in the past few years, Federal Reserve Chairman Ben Bernanke said on Wednesday.
Despite increases in inflation a few years ago and now declines of inflation to very low levels, inflation expectations in the United States are very stable, he told a question-and-answer session at a seminar in Tokyo hosted by the Bank of Japan.
Bernanke said most research considered low inflation as optimal and that price growth of around 2 percent appeared to be right.
Earlier, in a speech prepared for the conference, Bernanke repeated his plea for Fed independence, saying central banks best deliver steady economic growth and low inflation when free from political meddling.
Political interference in monetary policy can generate undesirable boom-bust cycles that ultimately lead to both a less stable economy and higher inflation, Bernanke said.
Addressing the same conference, Japan's central bank chief, Masaaki Shirakawa, said that keeping prices under control was not enough to ensure economic stability and warned that too much focus on short-term developments may destabilize an economy.
Price stability is certainly one important element in achieving a stable financial environment, he said. That is, however, not the sole factor. When a central bank feels constrained by short-term developments too much, that is more likely to amplify macroeconomic fluctuations, he said.
While the Fed is worried about proposals to subject its monetary policy to congressional audits, Japan's central bank has faced repeated government calls for more action to pull the economy out of deflation.
The government has insisted that price stability would be achieved with consumer prices growing moderately by 1 to 2 percent per year.
(Reporting by Leika Kihara and Stanley White in TOKYO and Mark Felsenthal in Washington; Writing by Tomasz Janowski; Editing by Neil Fullick)