Chicago Fed President Charles Evans said on Monday that Fed’s policy has been “successful” in achieving the maximum employment mandate. It’s “less successful” regarding the inflation objective. And to fix this, he added, “Fed must be willing to embrace inflation modestly above 2 percent 50 percent of the time.” For him, he would “communicate comfort” with core inflation at 2.5%, as long as there is “no obvious upward momentum” while the path back to 2% can be “well managed”.
For now, Evans is still expecting that “some further rate increases may be appropriate over time”. He expects growth to be at around 1.75-2.00% this year. Still he maintained that current patient stance is appropriate given the “heightened uncertainty” including US-China trade war. He also emphasized that “if activity softens more than expected or if inflation and inflation expectations run too low, then policy may have to be left on hold – or perhaps even loosened – to provide the appropriate accommodation to obtain our objectives.”
