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Fed's Evans: U.S. economy in 'good place,' but watching inflation

Published 11/06/2019, 10:23 AM
Updated 11/06/2019, 10:23 AM
© Reuters. FILE PHOTO: Charles Evans, president of the Federal Reserve Bank of Chicago, poses for a photo in Palm Beach

© Reuters. FILE PHOTO: Charles Evans, president of the Federal Reserve Bank of Chicago, poses for a photo in Palm Beach

By Lindsay Dunsmuir

NEW YORK (Reuters) - The U.S. economy is in a good place but the path of inflation will be important in deciding the future path of interest rates, Chicago Federal Reserve President Charles Evans said on Wednesday.

"I definitely think the U.S. economy is in a good place right now. I think the U.S. consumer has been very strong...I think we're in a good place, I think policy is in a good place. I think we've made a nice adjustment," Evans told reporters following an event at the Council of Foreign Relations in New York.

Ahead of the Fed's policy meeting last week, Evans said he would not mind another interest rate cut and has supported the central bank's decision to lower borrowing costs three times this year.

The Federal Reserve voted 8-2 to cut interest rates by a quarter percentage point at its October meeting to a target range of between 1.50% and 1.75% but signaled it would only lower rates again if there is a material deterioration in the U.S. economic outlook.

Evans did, however, point out that the current level of interest rates, in his view, would not be appropriate should there be a future negative shock to the U.S. economy.

"Our adjustments have not been anywhere large enough to change the dynamics substantially. If there was a big negative shock, we'd have to respond," he said.

Evans also made clear that he believes the central bank needs to do better explaining that its 2% inflation objective is symmetric - meaning it is comfortable with deviations both above and below that level.

"I think clarifying what we mean by symmetry is important…If you say our objective is 2% but you really act as if it is a ceiling, that reduces the monetary policy space you have to provide more accommodation," he said, adding that raising inflation expectations is also key.

To that end, the Chicago Fed chief said he will be closely watching inflation as part of his decision making on the future stance of monetary policy.

"I might be a little unusual in this regard because I've previously said there was an argument for monetary policy adjustment on the basis of the underperformance of inflation alone...I am going to be looking at inflation quite a lot," Evans said.

Evans does not have a vote on monetary policy this year but participates in the deliberations.

© Reuters. FILE PHOTO: Charles Evans, president of the Federal Reserve Bank of Chicago, poses for a photo in Palm Beach

Latest comments

I love the way all of the Federal Reserve officials talked about the future as if it's something they have a handle on. How they talk about risk and use ambiguous terms and talk about words like shock. it would be much simpler if mr. Evans would just come up to the microphone and speak the truth. We have failed...
wait so you are saying 8 years of obama holding interest rates at zero while pumping infinite fake making in to the system then subsequently trying to hyper-value the same currency all while trying to sustain a parabolic move in the stock market is not sustainable?
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