Economists believe that rising inflation indicates that the economy is growing in strength and that the Fed will soon need to take action.
The comments echo recent remarks from Fed Chair Janet Yellen, who said in November that escalating public debt and deficits "should keep people awake at night". According to a preliminary estimate for 2017, the Fed plans to contribute 80.2 billion USD to the federal budget, or 11.7 billion USD (12.3%) less than in 2016.
After covering its own expenses, the US Federal Reserve transfers each year to the Ministry of Finance its remaining funds, which are used to reduce the budget deficit.
"We are approaching a time when a comprehensive reconsideration of the monetary policy framework is likely warranted", Rosengren said.
Yet with U.S. unemployment low and economic growth robust, the bill could provide only a modest boost and, over 10 years, it is expected to balloon the deficit by $1.5 trillion. That means private investment could be crowded out, possibly eclipsing benefits from capital spending and potential output. He also expressed confidence that inflation will continue to tick up until it meets the Fed's 2 percent goal for healthy growth.
He noted that corporations and higher-income Americans are less inclined to spend, suggesting "a significant portion of the tax cuts will be saved not spent".
The drop was primarily due to the increases in the central bank's interest payments to commercial banks for their reserves deposited at the central bank.
The Federal Reserve Board said Wednesday that the system paid roughly $80.2 billion to the Treasury in 2017, driven by $113.6 billion in interest income from securities held on the central bank's balance sheet. The payments dipped slightly from previous years, falling from $92 billion in 2016 and $97.7 billion in 2015, but still more than double the sums contributed in the mid to late 2000s. He boosted his GDP expectations to between 2.5 to 2.75 percent growth, mostly due to the tax cuts.
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