Federal Reserve policymakers went out of their way on Saturday to play down the risk that aggressive measures to bolster the U.S. economy would lead to inflation in the future, in a clear signal of support for its ongoing actions to spur growth.
The U.S. central bank last month maintained a controversial program of buying $85 billion of bonds a month, while pledging to keep interest rates near zero until unemployment hits at least 6.5 percent, so long as inflation stays under 2.5 percent.
Two of the central bank's most dovish officials - Chicago Federal Reserve boss Charles Evans and Minneapolis Fed President Narayana Kocherlakota - pushed back against recent signals from Fed hawks who want to taper those bond purchases.
"Without signs of actual inflation, many inflation-risk discussions ultimately raise this specter of ... unlocking the long-ago-vanquished inflation demons from the dungeon," said Evans, a voting member of the Fed's policy committee this year.
"We have to monitor it, we have to be mindful, but I don't think we should obsess over it," he told an event in Boston.
Minutes of the Fed's March 19-20 meeting, released on Wednesday, indicated that "many" of its 19 policymakers thought the pace of bond buying could be slowed in coming months, provided the nation's labor market continues to improve.
However, data released since that meeting showed disappointingly small U.S. job growth in March and an unemployment rate of 7.6 percent, which was actually down from 7.7 percent the month before but only because people gave up looking for work.
The Fed's preferred inflation measure is around 1.3 percent, well below its 2 percent target.
Kocherlakota, like-minded and speaking alongside Evans, argued that a balanced policy approach would allow inflation to deviate somewhat from its official 2 percent inflation goal, in order to lower U.S. unemployment.
"A balanced approach would allow for deviations of inflation from its longer run goal in order to facilitate a faster decline in unemployment back to its desired level," Kocherlakota said.
Kocherlakota is alone in advocating for even more accommodation from the Fed in the form of lowering to 5.5 percent, from 6.5 percent currently, the "threshold" at which the central bank will consider raising rates from near zero.
Meanwhile, a third official, Atlanta Fed President Dennis Lockhart, also defended the bond buying and said the "chemistry" necessary to spark inflation - stronger credit growth and a much more buoyant economy - was simply not in place.
"I'm confident those improving conditions will be easily recognizable and the committee has a variety of tools to counter inflationary pressures with tightening measures," he told an event at the University of Iowa on fiscal policy.
Lockhart, who is not a voter this year, is viewed as a policy centrist and therefore a good guide to the consensus among Fed leaders.
"We are navigating in uncharted waters...but I am convinced we are weighing the benefits of the policy against the possible longer term costs in a balanced way," he told the audience.