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US Official: Trump Spending May Boost Inflation

  • Jim Randle

FILE - President-elect Donald Trump, center, listens to a member of the military in Baltimore, Dec. 10, 2016. Plans to put more money into infrastructure and the military may push inflation too high, one central bank leader says.

One of the leaders of the U.S. central bank says plans by the Trump administration to boost spending might push inflation too high.

U.S. Federal Reserve governor Lael Brainard told a Washington audience Tuesday that plans to put more money into infrastructure and the military may have the intended effect of stimulating economic growth. But she cautioned that such stimulus, arriving at a time when the economy is approaching full employment, might overshoot and overheat the economy.

The Fed is supposed to promote full employment and keep inflation to a modest two percent. The bank's leaders cut the key interest rate to record lows during the recession to boost growth, and have been very gradually raising rates as the economy recovers.

Brainard said officials might have to raise rates sooner or higher to fend off the threat of inflation.

Other Fed officials have also expressed worries about increased spending, and several say they need more specifics about Trump's spending and other economic plans.

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