Stanley Fischer, during a televised interview Saturday at the Federal Reserve Bank of Kansas City's annual Jackson Hole Economic Policy Symposium in  Wyoming. (Jonathan Crosby/Reuters)

JACKSON HOLE, WYO. — Federal Reserve Vice Chairman Stanley Fischer argued Saturday that the persistently low inflation that has plagued the country in recent years could finally begin to reverse, but would likely rise slowly.

Speaking at an annual symposium sponsored by the Kansas City Fed in the foothills of the Grand Tetons, Fischer expressed faith in the central bank’s ability to return inflation to its goal of 2 percent, which is generally associated with a healthy economy. But he cautioned that amid wild swings in world financial markets and China’s devaluation of its currency, central bank officials are monitoring the global economy “even more closely than usual.”

“In making our monetary policy decisions, we are interested more in where the U.S. economy is heading than in knowing whence it came,” Fischer said. “That is why we need to consider the overall state of the U.S. economy as well as the influence of foreign economies on the U.S. economy as we reach our judgement on whether and how to change monetary policy.”

The Fed is facing a momentous decision over whether to begin withdrawing its unprecedented support for the U.S. economy when it meets in Washington next month for its regular policy meeting. The central bank slashed its target interest rate to zero during the depths of the financial crisis in 2008 and has left it there ever since in hopes of fostering a stronger recovery. Over the past year, hiring has been robust and the unemployment rate has dropped to 5.3 percent, leading officials to finally consider the momentous step of raising its benchmark rate.

Yet exceedingly low inflation has thrown a wrench into those plans. Government data released Friday showed prices, excluding food and energy, rose just 1.2 percent compared to a year ago — well below the Fed’s goal. In his remarks, Fischer said the stronger U.S. dollar, falling oil prices and weak global demand have weighed on inflation over the past year. But he said many of those factors are beginning to fade.

“There is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” Fischer said.

But the Fed’s second-in-command stopped short of saying how the recent global turmoil might change the central bank’s price outlook in the near term — and whether that would impact the timing of decision on a rate hike. Following the recent turmoil in global markets, investors increasingly expect the Fed not to move in September. The central bank has said it expects to increase its target rate some time this year, and officials seem divided over when to make the call. In remarks Friday, Fischer indicated no decision has been about a September liftoff.

Low inflation typically accompanies weak economic growth. It makes debt more onerous to pay off and is often associated with stagnant wages. Falling prices as a result of a stronger dollar can also hurt exports. 

Academics have been perplexed that prices have not risen even as the recovery strengthens. Fischer said that there was been “no clear evidence” of core prices moving higher in recent years.

He pointed to the rise of the dollar over the past year as a key factor holding back inflation through lower import prices. Fed models show a 10 percent spike in the greenback pushes down inflation over the same year as the rise but reduces economic growth in the following year. That means the dollar’s strength this year could restrain U.S. GDP in 2016 and possibly into 2017.

In addition, he said a slowdown in China contributed to a drop in commodity prices. Fischer also called the recent decline in energy prices a “largely one-off event.”

But other economists have questioned whether the Fed can achieve its target for inflation without providing more stimulus for the economy. Minneapolis Fed President Narayana Kocherlakota has argued against a rate hike this year and for even an even looser stance of Fed policy.

“Add up all the shortfalls of inflation,” Kocherlakota said in an interview here. “That can’t be viewed as having been a success on the monetary policy front.”

Hedge fund investor Ray Dalio predicted this week that the Fed will unleash major stimulus before it tightens policy significantly. Harvard University economist Lawrence Summers wrote this week in The Washington Post that the economy is in a new normal that will require lower interest rates in the long run — and advocated waiting to raise the Fed’s benchmark rate.

“It is far from clear that the next Fed move will be a tightening,” Summers wrote on Twitter.

But Saturday, Fischer said that changes to central bank policy trickle slowly through the economy. That’s why the central bank should not wait until inflation reaches 2 percent to begin raising its interest rate target, he said.

However, Fischer attempted to shift attention away from that first step. Instead, he pointed out that the Fed will likely be able to take its time bringing rates back to traditional levels.

“We will most likely need to proceed cautiously in normalizing the stance of monetary policy,” he said. “The entire path of interest rates matters more than the particular timing of the first increase.”