HomeLive CommentsFed Evans expects no change in interest rate through end of 2020

Fed Evans expects no change in interest rate through end of 2020

Evans expects the US economy to grow “a touch above 2 percent this year”. Even though growth is clearly slowing, ‘2 percent is not far from my staff’s estimate of the economy’s long-run potential growth rate, which is between 1-3/4 and 2 percent”. Thus, growth would continue to run roughly in line with potential. Meanwhile, unemployment is anticipated to remain close to current level for some time, “below the long-run benchmark of 4.2 percent”.

He also forecast inflation to “move up slowly and then modestly overshoot out 2 percent target a couple years down the road”. To achieve this, more monetary accommodation is needed that he though necessary just this last December. Since then, some data came in weaker, downside risks multiplied, and inflation and inflation expectations retreated. Thus, the two 25bps rate cut this year were “quite appropriate”.

Yet, Evans added “policy probably is in a good place right now”. Growth outlook is good, and we have policy accommodation in place to support rising inflation.”. He is “keeping an open mind” to arguments of more accommodations, including uncertainties and unexpected downside shocks. But his overall assessment is “pretty much in line” with FOMC’s median outlook. That is, no additional change in federal funds rate target through the end of 2020, and one rate hike in each of 2021 and 2022.

Evan’s full speech here.

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