Fed's Vice Chairman: "negative interest rates are in Japan and Europe effects yet"

Two key Federal Reserve officials said Monday they expect inflation to get closer to the central bank's target.

In separate prepared remarks in Washington, neither Fed Vice Chairman Stanley Fischer nor governor Lael Brainard made direct reference to next week's meeting of the Federal Open Market Committee. But Brainard argued for patience in rate increases amid possible risks that inflation and U.S. economic activity will fall.

"Tighter financial conditions and softer inflation expectations may pose risks to the downside for inflation and domestic activity. From a risk-management perspective, this argues for patience as the outlook becomes clearer," Brainard said.

Both Fischer and Brainard vote on the Fed's policymaking committee, which will release its policy decision and outlook next week. The comments followed Friday's February jobs report, which showed the U.S. economy added a better-than-expected 242,000 jobs.

Their comments also came after data late last month that showed core inflation rose 1.7 percent in the 12 months ending in January. Fischer noted that he has seen possible first signs of an inflation increase.

"We may well at present be seeing the first stirrings of an increase in the inflation rate — something that we would like to happen," Fischer said.

In a separate speech, Brainard said she expects inflation to move back to the central bank's 2 percent target despite risks to the downside. She added that she was "heartened" by progress in employment. Brainard noted, though, that a tight labor market does not guarantee inflation will move toward the 2 percent target.

Fischer said rates still remain low by historical standards. He added that the Fed may eventually face zero-rate conditions again.

Fischer also said empirical evidence has not yet shown that negative interest rates are not effective in Japan and Europe. He noted that central banks can still run "expansionary monetary policies" through bond-buying and other measures, even at near-zero interest rates.

Market expectations for rate hikes have waned in recent months amid sluggish stock markets and fears of a global slowdown.