Tags: federal reserve | charles evans | shudown | economic impact

Fed's Evans: Tough to Make Taper Call at December Meeting

Monday, 21 October 2013 08:40 AM

It will be "tough" for the Federal Reserve to have sufficient confidence in the strength of the U.S. recovery by its meeting in December to start scaling back a massive Fed bond-buying campaign, a senior U.S. central banker said on Monday.

"October is a tough one. December? I think we need a couple of good labor reports and evidence of increasing growth, GDP growth. It is probably going to take a few months to sort that one out," Chicago Federal Reserve President Charles Evans told CNBC television in an interview.

The Fed is buying $85 billion in Treasurys and mortgage-backed securities every month to keep interest rates low and stimulate economic recovery in the United States.

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Fed officials hold their next policy meetings later this month and then in December. Evans, one of the 19-member policy-setting committee's most dovish members, is a voter this year.

"It is very difficult to feel confident in December given that we're going to repeat part of what just took place in Washington," Evans said.

A bitter partisan fight between President Barack Obama's Democrats and conservative Tea Party Republicans resulted in a 16-day government shutdown that was only lifted last week in a last-ditch deal that also averted a harmful U.S. debt default.

However, that political compromise only agreed to fund the federal government until January 15 and raise the nation's borrowing limit until February 7, meaning that the fiscal drama will potentially resume in the New Year.

"So December will be pretty tough and we could in fact get more restrictiveness. We've seen the government lop off more than a percentage point from growth this year by many estimates," he said, referring to the fiscal headwind caused by tax hikes and government spending cuts.

Meanwhile, Janet Yellen will ensure monetary policy "continuity" once she replaces Ben Bernanke as chair of the Federal Reserve next year,he said.

"I think Janet will be a great chairman. She has an awful lot of experience with monetary policy — up close and personal," he told CNBC.

"I think we'll see a lot of continuity. And we'll be looking at the economic situation and inflationary pressures as they present themselves, and (will) respond accordingly," he said.

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The Federal Reserve will need more time to figure out how much harm the budget battles in Washington have done to the U.S. economy, potentially delaying the start of the Fed's bond tapering, a senior U.S. central banker said on Monday.
federal reserve,charles evans,shudown,economic impact
Monday, 21 October 2013 08:40 AM
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