Chicago Fed President Charles Evans warned that “core inflation has retreated to relatively low levels over the past three months, elevating my concerns over the outlook for inflation.” Additionally, US economy also “faces many uncertainties and risks”. In particular “consumption and business fixed investment were quite soft in Q1, despite 3.2% GDP growth. And there is “distinct risk” that inflation expectation are “too low” and will be “slow to recover” to target.

On inflation, Evans elaborated and noted, since December, core consumer inflation has fallen and is now just a bit above 1-1/2 percent.  And, underlying inflation trends may be mired below 2 percent. he emphasized “we cannot declare victory yet on our inflation mandate.”

Evans also noted that “given how muted inflationary pressures appear today, core PCE inflation rising to 2-1/4 to 2-1/2 percent is not a big concern to me at the moment.” That indicates he’s not ready to push for a rate hike even if inflation might overshoot temporarily.

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On the other hand, Evans was concerned that “if activity softens more than expected or if inflation and inflation expectations continue to 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.”

Evan’s full speech “On Risk and Credibility in Monetary Policy“.

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