NEW YORK (CNN/Money) - Robert McTeer, president of the Federal Reserve Bank of Dallas, said Friday the threat of inflation to the U.S. economy is distant, but if it draws closer, the central bank will be able to raise interest rates gradually.

Robert McTeer, president of the Federal Reserve Bank of Dallas, said the threat of inflation to the U.S. economy is distant. Play video (Real or Windows Media)

Appearing on CNNfn, McTeer said inflation continues to remain quiet as the economic recovery absorbs the slack created by the overproduction in the late 1990's.

"Inflation is dormant right now. We still have a lot of slack left over," McTeer noted. "I don't worry too much about inflation until a lot of that slack is taken up."

McTeer added that only when inflation becomes a clear danger to the U.S. economy will the Federal Reserve's pledge to keep interest rates low for a "considerable period" come to an end.

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When it does see the need to raise interest rates to stem inflation, the Fed can do so gradually, McTeer said.

As for the unexpected drop in November's durable orders, McTeer said it was a negative sign, but the reading was most likely an aberration in the overall economic recovery.