Fed’s Evans: Rate Cuts Needed to Defend Fed’s Inflation Target

Federal Reserve Bank of Chicago President Charles Evans is seen last year. He and other Fed officials appear to be on board with lowering the federal-funds target rate range at the end of this month.


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Federal Reserve Bank of Chicago President Charles Evans said in a television interview Tuesday the U.S. central bank needs to lower its short-term rate target to defend its 2% inflation target.

“The economy is solid. I don’t want to be talking down the state of the economy,” but there are rising uncertainties and inflation has been persistently below the official goal, Mr. Evans told CNBC.

The Fed needs to take action to push up inflation over the 2% target to affirm that the goal is truly symmetrical and can tolerate an overshoot in the wake of a persistent shortfall in inflation relative to the goal, he said.

“In order to get inflation up to two-and-a-quarter percent over the next three years I need 50 basis points more of accommodation. And in fact, maybe that’s not quite enough,” Mr. Evans said.

“From a risk-management standpoint, it makes sense that you might think that we are little bit more restrictive [with monetary policy] than we need to be, and we need to be more accommodative” to compensate for that, he said.

Mr. Evans is a voting member of the rate-setting Federal Open Market Committee. He and other Fed officials all appear to be on board with lowering what is now a federal-funds target rate range of between 2.25% and 2.50% at the end of the month.

Some market observers want to see a large, half-percentage-point move. Mr. Evans didn’t indicate if he wants to front-load the Fed’s easing actions with a half-percentage point cut, as opposed to a quarter-percentage-point move.

Write to Michael S. Derby at michael.derby@wsj.com

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