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Fed's Evans says policy to stay on hold 'for some time' - Metro US

Fed’s Evans says policy to stay on hold ‘for some time’

FILE PHOTO: Chicago Federal Reserve Bank President Charles Evans looks on during the Global Interdependence Center Members Delegation Event in Mexico City

(Reuters) – Chicago Federal Reserve Bank President Charles Evans on Wednesday said that while he’s become much more positive about the economic outlook, he continues to expect the U.S. central bank will need to keep policy easy for some time in order to boost inflation to healthier levels.

With vaccines rolling out quickly, he said, and buoyed by government spending and accommodative monetary policy, the economy has “a good deal of momentum,” he said in remarks prepared for delivery to the Prairie State College Foundation.

“I am optimistic that the economy is poised for strong growth later this year,” he said. The unemployment rate, now at 6%, is expected to decline below most Fed policymakers’ estimate of a 4% long-run sustainable rate by the end of next year, putting the Fed’s goal of full employment “within sight,” he said.

But meeting the Fed’s 2% inflation goal, he said, will be more difficult. Though prices will rise in coming months, he said, that increase will be temporary unless households and businesses shake the experience of 15 years of low inflation.

“Some even higher rates of inflation are needed to get inflation to average 2 percent and to solidify inflation expectations about that number,” Evans said. “So, I see the need for continued accommodative monetary policy to reach our goals.”

The Fed has said it will not raise rates until the economy reaches inclusive, full employment, and inflation has not only hit the Fed’s 2% target but is on track to exceed it for some time. Most policymakers don’t see those goals as being met before the end of 2023. It has also promised to keep buying at least $120 billion of bonds each month until the Fed sees “substantial further progress” toward those goals.

“Those conditions will not be met for a while,” Evans said, noting Fed policymaker forecasts. “Policy is likely on hold for some time.”

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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