Tags: Feds Evans Economic Growth Not Robust Enough

Fed's Evans: Economic Growth Not Robust Enough

Friday, 07 January 2011 05:07 PM EST

The sluggish economy shows signs of gaining strength but still needs a lot of help from the Federal Reserve to get back on track, a top Fed policymaker said on Friday.

Chicago Federal Reserve Bank President Charles Evans said the Fed's controversial $600 billion bond-buying program is necessary both because unemployment is too high and inflation is too low.

"More recent data have been coming in somewhat stronger. But they do not yet point to the kind of robust, self-perpetuating recovery that we need in order to close today's large resource gaps within a reasonable amount of time," Evans said in remarks prepared for delivery to an economics conference.

Evans, a voter this year on the Fed's policysetting panel, said the economy's current status warrants an easy monetary policy.

"Even if the Fed were charged with achieving price stability alone, as are many other central banks, undershooting our inflation target would dictate a highly accommodative monetary policy stance," Evans said.

There is no policy conflict between improving the employment and inflation outcomes, he added.

Lawmakers who worry the Fed is too focused on lowering unemployment would like to strip the central bank of the employment side of its dual mandate and restrict it to inflation fighting.

The Fed cut interest rates to near zero in December 2008 and bought $1.7 trillion of longer-term securities to pull the economy out of a deep recession. The U.S. central bank announced in November it would start buying bonds again, a decision that met with widespread criticism domestically, internationally, and within the Fed itself, for weakening the dollar and risking dangerous inflation.

Evans is known as one of the strongest supporters of Fed action to boost economic recovery. Other Fed officials worry that aggressive actions are setting the stage for inflation or dangerous asset bubbles down the road.

The Chicago Fed chief argued that with underlying inflation well below the Fed's comfort zone of around 2 percent, the U.S. central bank has a duty to act.

"Our policies should aim to moderately raise inflation expectations while maintaining low short-term nominal interest rates," he said.

The Fed is falling short of its full employment mandate as well, Evans said. While the jobless rate fell to a surprisingly low 9.4 percent in December, it remains high, and the drop came as discouraged workers stopped looking for work.

© 2025 Thomson/Reuters. All rights reserved.


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The sluggish economy shows signs of gaining strength but still needs a lot of help from the Federal Reserve to get back on track, a top Fed policymaker said on Friday. Chicago Federal Reserve Bank President Charles Evans said the Fed's controversial $600 billion...
Feds Evans Economic Growth Not Robust Enough
391
2011-07-07
Friday, 07 January 2011 05:07 PM
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