Central bankers are approaching a deal to set an explicit inflation target, a top Federal Reserve official said, part of a campaign to boost the economy by guiding expectations on interest rate policy.

We are very close to having inflation targeting in the U.S., James Bullard, president of the St. Louis Federal Reserve Bank, told Bloomberg Radio in an interview on Thursday. A story of his remarks was posted to Bloomberg's website on Friday.

We are getting closer to being able to make a committee-wide statement about these longer-term policy goal issues, Bullard said.

Since the 2007-2009 recession, the Fed has adopted new communication strategies to improve transparency and support growth by making clear that borrowing costs will be held low for an extended period.

Expectations of low interest rates can encourage investors to buy higher-yielding assets like company shares, providing the companies with more capital. Similarly, banks could be pushed to boost their own earnings by lending more money.

In the last four policy meetings, the Fed has said it will likely hold interest rates at ultra-low levels until at least mid-2013.

Minutes of its most recent meeting in December showed policymakers plan to begin publishing their forecasts for rates. It also showed they debated a statement on their longer-term goals and policy strategies. Officials are set to resume their discussion at their next policy meeting on January 24-25.

Providing an explicit inflation target could help ease concerns that the Fed might take its eye off inflation in its effort to spur stronger growth. In addition, if inflation looks unlikely to breach the Fed target anytime soon, investors can count on the Fed holding open the monetary spigot.

Individual forecasts from Fed policymakers have shown most aim to keep inflation in a 1.7 percent to 2 percent range, but an explicit target that they all agree on could give the public and financial markets a clearer prism to gauge how the central bank might respond to incoming data.

According to Bloomberg, Bullard said a Fed statement of longer-run goals would name a target but it would also reiterate things we have said over the years about how keeping inflation low and stable contributes to great economic performance over all.

(Reporting by Jason Lange in Washington; Editing by Leslie Adler)

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