Fed official hints at rate hike, says inflation is coming

By Joseph Lawler, Joseph Lawler

Published December 20, 2015

Federal Reserve vice chairman Stanley Fischer issued a vote of confidence Wednesday night that inflation will rise in the U.S. if unemployment continues to fall, providing one possible reason for the Fed to raise rates sooner rather than later.

Fischer expressed faith that the Phillips Curve, the historical relationship between falling unemployment and rising prices, will soon reassert itself. That dynamic would be a reason for the Fed to tighten monetary policy even with inflation low.

Fischer's bet on the link between falling unemployment and inflation is one that other members of the central bank have rejected in recent weeks, saying that the Fed should not raise rates even though the unemployment rate is low.

"I believe that we will see it, the Phillips Curve will come back," Fischer said in an question-and-answer session at the Embassy of Canada in Washington.