Chicago Fed President Charles Evans indicated that Fed could have delivered enough rate cuts to lift inflation back to 2% target, and probably some overshooting. He said that rising trade and geopolitical risks led to global slow down. And the “situation called for us to cut policy rates 50 to 75 basis points below the long-run neutral rate and then leave policy on hold for a time”.
“And, this more accommodative stance is needed to support a roughly similar growth outlook to what I had anticipated before and, importantly, to support moving inflation up with greater assurance to achieve our symmetric 2 percent goal within a reasonable time.”
After rate cut back in July and September, federal funds rate is now sitting at 1.75-2.00%, comparing to neutral rate of 2.50%. Evans said that the current monetary policy stance “could well result in inflation modestly overrunning 2% for some time.
