Fed official sees hints of too-low inflation moving up

Federal Reserve Vice Chairman Stanley Fischer said Monday that inflation in the U.S. may be starting to tick up from too-low levels, a key condition for further interest rate hikes.

"We may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen," he said in a speech in Washington.

At the same time, another Fed official, Lael Brainard, expressed uncertainty about whether an improving job market would be enough to bolster inflation, given persistently low oil prices and a strong dollar. Inflation has "persistently underperformed" relative to the Fed's target of annual price gains of 2 percent, she said in a separate speech Monday.

The two Fed officials views show that the Fed is wrestling with the timetable for rate increases. In December, the Fed raised its key rate from record lows.

Policymakers did not raise rates at its January meeting, and officials are expected to leave rates unchanged when they meet again on March 15-16. Many analysts don't expect another rate hike until June at the earliest.

Fischer also expressed deep concerns about the slowdown in U.S. productivity over the last two decades — a trend that has held down worker pay.

Fischer said "there are few issues more important for the future of our economy" than boosting productivity, the amount of output per hour of work.

Productivity grew at a solid 3 percent from 1952 to 1973, then slowed to 2.1 percent from 1974 to 2007, he said. From 2008 to 2015, productivity growth in the United States fell to an average rate of just 1.2 percent.

Fischer said this retreat will likely have "severe consequences" on the nation. But economists are unsure of why the slowdown has occurred or what will happen to productivity in the future.

His comments were in a speech to the National Association for Business Economics.