(Adds more of Waller's outlook)
By Ann Saphir and Jonnelle Marte
April 16 (Reuters) - The U.S. economy is set to take off as more Americans are vaccinated, the virus gets under control and consumers become more comfortable engaging in economic activity, Federal Reserve Governor Christopher Waller said on Friday. "I think the economy is ready to rip," Waller said during an interview with CNBC. Waller said he expects the U.S. economy to grow by 6.5% this year, for inflation to rise by about 2.5% and for the unemployment rate to drop to about 5% by year end.
The U.S. central bank slashed interest rates to near zero last year to bolster the economy as it was being hammered by the pandemic. Officials also say they will purchase $120 billion a month in bonds until there is "substantial further progress" toward the Fed's goals for maximum employment and inflation.
Waller said that despite the brighter outlook, the U.S. economy still has a long way to go before those targets are achieved.
Unemployment rates for minority workers are still elevated, he said. And any price increases seen in the near term are likely to be short lived as bottlenecks caused by the pandemic are resolved and the bump in demand from stimulus checks fades.
"Whatever temporary surge in inflation we see right now is not going to last," Waller said.
A new U.S. Fed index of inflation expectations hit 2.01% for the first quarter of 2021, the first time the quarterly measure has hit the Fed's 2% target since mid-2018, according to an update released on Friday.
Fed policymakers would be fine with having inflation run above the central bank's 2% target for some time to make up for periods of undershooting the goal, he said. But officials would act if inflation stayed much higher than that.
"We want it to be on average around 2%," Waller said. "I don't think anybody would be very comfortable if it got to three or three plus and stayed there for a while." (Reporting by Jonnelle Marte and Ann Saphir Editing by Chizu Nomiyama)