U.S. economic growth should return to trend levels this year, and with the job market still surprisingly strong the biggest risk is still that inflation will not fall as expected, Chicago Fed President Michael Moskow said on Friday.
The overnight federal funds rate that the Federal Reserve has maintained at 5.25 percent for the past year is "appropriate" for now, Moskow told CNBC Television.
Moskow is a voting member of the monetary policy-setting Federal Open Market Committee this year but is scheduled to retire at the end of August.
Moskow said in an interview he would still like to see inflation lower, and that the U.S. central bank has "a way to go" to get inflation at levels he is comfortable with.
For now, though, inflation expectations seem well contained, he said.
Moskow said payrolls growth remains stronger than expected, and that the tight supply of workers in some industries has resulted in "labor hoarding" and less layoffs than would have been expected given recent weak economic growth.
Turning to the recent slump in U.S. share prices and spike in interest rates, Moskow said that higher bond yields did not necessarily make the Fed's job on monetary policy easier.
Markets have a lot of day-to-day "noise" and while the Fed does not respond to short-term fluctuations it is aware that a possible longer-term drop in asset prices could have a negative "wealth effect," he said.