Federal Reserve Bank of Dallas President Robert Kaplan said Friday that the Fed needs to be “humble” in how it assesses inflation, noting that while prices may increase in the short-term, some of those changes may be temporary.

“The jury’s out on how much of this inflation pressure is going to be persistent,” Kaplan told Yahoo Finance in an exclusive interview.

[Read the full transcript here.]

Kaplan said it would not “surprise” him if the Fed saw more price pressures over the next year, pointing to price increases that could come from shortages in semiconductors, wood products, metals, and packaging products.

The Dallas Fed chief also said rising crude oil prices could also contribute to inflationary pressures, and expects oil prices globally to “firm further.”

Inflationary pressures just temporary?

But Kaplan said structural forces like technology and globalization have created downward pressure on inflation globally. Those forces could also soften the impact of further fiscal stimulus, which Kaplan said could “further strengthen” his expectation for “very strong growth” in the back end of 2021.

“We think it’s wise to be humble and say, I think we’re going to have to track how this unfolds,” Kaplan said, adding that the cyclical pressures from fiscal stimulus, for example, aren’t guaranteed to outweigh those structural changes.

Former Treasury Secretary Larry Summers raised concerns that a $1.9 trillion stimulus package from the Biden administration could overheat the economy and “set off inflationary pressures of a kind we have not seen in a generation.”

But Kaplan said how that plays out is "not going to be as clear as it might have been 10 years ago or 20 years ago, where you'd be confident that you'd have strong growth."

For now, inflation appears to be muted.

On Wednesday, the Bureau of Labor Statistics released January data showing the core Consumer Price Index gaining just 1.4% year-over-year, well below the Fed’s 2% target on inflation. The core CPI, which strips out volatile prices of food and energy, tends to overstate the Fed’s preferred measure of inflation, core personal consumption expenditures.

Fed policy

In the meantime, the Fed has committed to near-zero rates and aggressive asset purchases until the economy shows signs of “substantial further progress” towards the bank’s dual mandate goals of maximum employment and stable prices.

Fed Chair Jerome Powell has specifically emphasized the labor market side of its mandate, asserting Wednesday that the Fed wants to keep policy easy for longer to pull more workers back into the labor market.

“This means that we will not tighten monetary policy solely in response to a strong labor market,” Powell said.

Kaplan has similarly advocated for keeping policy more accommodative than in the past for the sake of a stronger labor market, but notably dissented from the Fed’s September 2020 meeting. He favored more “flexibility” in having the option to raise rates after the Fed reaches its dual mandate.

“It was a debate about after we get beyond it wanting to have flexibility, if necessary, to make the adjustments we need to make sure to help wean the economy off some of these extraordinary measures,” Kaplan told Yahoo Finance.

But the Dallas Fed chief clarified that would not be anytime soon.

“We're not out of the woods yet by a long shot,” Kaplan said.

The Fed’s next policy-setting meeting is scheduled for March 16 and 17.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

• NYC Chinatown's entrepreneurs turn to Zoom, TikTok to battle COVID-19 pandemic

• Powell: Fed 'will not tighten' policy until low-income workers recover

• Fed examines own diversity levels as it seeks to address Black unemployment

• Less-educated Asian Americans among hardest hit by job losses during pandemic

• A glossary of the Federal Reserve's full arsenal of 'bazookas'

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.