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"A
large part of the current inflation is temporary. It has to do
with the decline in the price of oil; it has to do with the
decline in the price of raw materials," he said on Bloomberg TV.
"These are things which will stabilize at some point," Fischer
added, in comments that were careful not to tip his hand on when
he thinks U.S. interest rates should rise.
"We are in a situation with ... nearly full employment but very
low inflation."
The U.S. central bank has kept rates near zero since the depths
of financial crisis in 2008, but could start tightening policy
as soon as next month, given unemployment has fallen to 5.3
percent from a recessionary high of 10 percent.
The Fed's preferred inflation measure is 1.3 percent, below its
2-percent target, which has sown caution among some
policymakers.
Rates will not stay this low "forever, and we need to be looking
ahead as we go," said Fischer, a close ally of Fed Chair Janet
Yellen. Employment has been "rising pretty fast ... yet
inflation is pretty low."
He said the Fed "would be happier if we saw more physical
investment than financial investment" given the monetary
accommodation.
Globally, Fischer said the deflationary trend "bothers" the Fed,
but is one of many factors the U.S. central bank is watching.
(Reporting by Jonathan Spicer; Editing by Bernadette Baum)
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