By Michael S. Derby

 

Federal Reserve Bank of Chicago leader Charles Evans said a strong recovery in the job market remains possible for the U.S., as he pushed back against the idea he has a different take from his colleagues on the path for future rate rises.

Mr. Evans said central bank policy, with near zero rates and the expectation they'll stay there for several years to come, coupled with asset buying, is set "quite appropriately" for the challenges facing the nation. This level of support will help the economy over time, but Mr. Evans also said that other things are even more powerful given the nature of the coronavirus pandemic: "Fiscal policy support and improved public safety are really the key elements" to get the economy back on track.

Mr. Evans said he believes what's now a 8.4% unemployment rate could fall to 7% by the end of this year, and to 5.5% by the end of next year, but he added that rapid recovery does depend on some amount of fiscal support.

"I have been surprised the U.S. economy has been as resilient since June as it has," Mr. Evans said given the renewed virus outbreaks. "One way or another, for good or bad, we seem to be powering through 200,000 deaths of American people, and we are trying to keep people safe as we go through and produce and all of this. I might have thought there'd be a little more concern in terms of consumer confidence. But the economy has done better than that," Mr. Evans said.

The policymaker said he was on board with the Fed's new guidance that said the central bank will keep rates at near zero levels until maximum job growth is attained, and inflation has hit 2% and is on track to moderately overshoot that goal. He added going over 2% is important and going up to 2.5% would not be a problem from his perspective, and that it would likely even be necessary.

Mr. Evans also said he doesn't see much to be gained by increasing the Fed's pace of asset buying but he said that could change in the future. Mr. Evans also said massive U.S. deficits right now are necessary to provide aid in crisis and he sees no issues financing that red ink.

 

Write to Michael S. Derby at michael.derby@wsj.com

 

(END) Dow Jones Newswires

September 23, 2020 12:36 ET (16:36 GMT)

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