Federal Reserve vice chair Stanley Fischer says an increase in inflation is stirring

Chris Papadopoullos
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The federal open market committee will meet again next week (Source: Getty)

Inflation in the US could be about to begin rising back up to its two per cent target, the vice chair of the Federal Reserve said today.

Stanley Fischer said he disagreed with the idea that the link between unemployment and inflation had be severed.

"Since the US economy is now below our two per cent inflation target, and since unemployment is in the vicinity of full employment, it is sometimes argued that the link between unemployment and inflation must have been broken. I don't believe that," Fischer told an audience at the National Association for Business Economics.

"Rather the link has never been very strong, but it exists, and we may well at present be seeing the first stirrings of an increase in the inflation rate--something that we would like to happen."

Unemployment in the US is currently 4.9 per cent, it's lowest since 2008.

His colleague on the federal open market committee Lael Brainard said she was "heartened by the continued strong progress on employment and the resilience of American consumers". But she was more cautious on the inflation front.

“We should not take the strength in the US labor market and consumption for granted,” Brainard said. She added: “Sources of robust demand around the globe are few, and sources of weakness relatively greater.”

The speeches come a week before the Federal Reserve's policy meeting next week, when it will decide whether to hike rates for the second time since they hit record lows.

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