Fed's Evans Isn't Ready to Call for Changes in Monetary Policy -- 3rd Update
By Michael S. Derby
Federal Reserve Bank of Chicago President Charles Evans said
Friday that although the latest job creation data is disappointing,
he wasn't yet ready to call for changes in central-bank monetary
Instead, he said government aid, which can be targeted and
deployed quickly, is the most effective way to deliver new support
to the U.S. economy right now, and is more potent relative to what
the Fed can do with its suite of tools.
The November data, which showed moderating levels of job
creation, was "weaker than I was expecting," Mr. Evans told
reporters after remarks to a Michigan banking group. But even so,
he said he doesn't see a need for the Fed to alter its path in what
remains a time of high uncertainty.
"The most important source of stimulus for the economy over the
next few months is some type of fiscal support and increase in
public health safety support," Mr. Evans said. "I think that that
would be quicker. I think that that's most relevant at the moment"
compared with actions the Federal Reserve could take.
In a separate appearance, Minneapolis Fed leader Neel Kashakari
joined with Mr. Evans in expressing concern about the slow pace of
job creation. The government said the jobless rate stood at 6.7%
last month -- it's down from a shockingly high 14.7% in April --
but many economists noted the drop in unemployment was actually
driven by people leaving the labor force.
"We are a long, long way away from a fully recovered economy"
and "the true unemployment rate in America today is around 9.9%,"
Mr. Kashkari said.
Fed officials have broadly called for another round of
government aid as the coronavirus pandemic ranges on, amid surging
infections, but so far elected officials have failed to deliver
That has raised questions whether the Fed will have to do more
to help the economy. With rates near zero and unable to be lowered
further, that has led many to look to the Fed's already massive
bond-buying effort as a place where the central bank could act,
either by increasing purchases or changing what's being bought.
Mr. Evans, who doesn't have a voting role on the rate-setting
Federal Open Market Committee, said he isn't yet ready to make
changes in what is a highly uncertain time.
"I am comfortable with our current setting for asset purchases,
and I would be comfortable with that, presumably, for the next
several months until we get to more clarity on what the economic
situation is going to be, I think in the spring," Mr. Evans said.
"I'm not opposed to more accommodation. I'm just not exactly sure
what the right timing is."
Mr. Evans said that while the economy, which recovered more
quickly than he had anticipated, is facing renewed threats because
of the rise of Covid-19 cases, the swift arrival of vaccines adds
hope to the longer-run picture.
"This is a very unusual period where you can have more optimism
about six months from now, middle of next year, and still need to
be mindful that things are very precarious, still, at the moment,"
Mr. Evans said again that the likelihood it will take some time
for inflation to exceed the Fed's 2% target means it would be years
before the central bank will be able to lift its short-term target
rate range off the near-zero level it has been at since March, when
the pandemic started taking hold.
"I do not expect that the short term policy rate, the
federal-funds rate is going to be increased until we've got
inflation up to 2%. Currently, I still think that won't be before
2023, probably 2024, even," Mr. Evans said.
Mr. Kashkari, who does have a vote on the FOMC, also said it
could be several years before the Fed finds the space to raise
interest rates, and he said he sees little threat of an inflation
surge that might alter that outlook and move forward the time for
The Fed has one more meeting scheduled for this year, with the
FOMC set to gather on Dec. 15 and 16.
Write to Michael S. Derby at firstname.lastname@example.org
(END) Dow Jones Newswires
December 04, 2020 15:04 ET (20:04 GMT)
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