Fed should 'communicate comfort' with slightly higher inflation: Evans

By Trevor Hunnicutt NEW YORK (Reuters) - The U.S. Federal Reserve should be willing to embrace inflation above 2 percent half the time and communicate that preference with the public to avoid missing its current target, a top policymaker at the central bank said on Monday

Reuters April 16, 2019 00:05:59 IST
Fed should 'communicate comfort' with slightly higher inflation: Evans

Fed should communicate comfort with slightly higher inflation Evans

By Trevor Hunnicutt

NEW YORK (Reuters) - The U.S. Federal Reserve should be willing to embrace inflation above 2 percent half the time and communicate that preference with the public to avoid missing its current target, a top policymaker at the central bank said on Monday.

"While policy has been successful in achieving our maximum employment mandate, it has been less successful with regard to our inflation objective," Federal Reserve Bank of Chicago President Charles Evans said in New York.

"To fix this problem, I think the Fed must be willing to embrace inflation modestly above 2 percent 50 percent of the time. Indeed, I would communicate comfort with core inflation rates of 2-1/2 percent, as long as there is no obvious upward momentum and the path back towards 2 percent can be well managed."

Evans' remarks come ahead of a broad Fed policy review this year that may result in the central bank welcoming inflation that is slightly and temporarily over its target. Some policymakers and analysts think the Fed now has far more ability to respond to upward spikes in prices than to persistently low readings. That is because interest rate cuts lose their potency as borrowing costs approach zero.

But any alternatives to the Fed's current approach could be controversial and Evans said the central bank will need to debate those options carefully.

Evans also voiced support for the Fed's current stance of patience on any further rate hikes given "heightened uncertainty," including the outcome of U.S.-China trade negotiations.

"At the moment, the risks from the downside scenarios loom larger than those from the upside ones," he said at a New York Association of Business Economists event.

Evans, who as recently as January forecast three rate hikes this year, still says that "some further rate increases may be appropriate over time" if growth is close to its potential. He sees growth at around 1-3/4 to 2 percent this year, lower than his prior estimates.

But he also said policy could be loosened in other scenarios. Many investors are betting that the Fed's next move is more likely a rate cut than a hike.

"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," Evans said.

(Reporting by Trevor Hunnicutt; Editing by Andrea Ricci)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Oil rises 2% as OPEC complies with production cuts
Business

Oil rises 2% as OPEC complies with production cuts

By Jessica Resnick-Ault NEW YORK (Reuters) - Oil prices strengthened on Wednesday, as OPEC and its allies were seen complying with a pact to cut oil supply in September, even as concerns loomed that recovery in fuel demand will be stalled by soaring global coronavirus cases. Early in the day crude was boosted by a bullish stock market. Even as equities whipsawed on pandemic worries, oil stayed higher, buoyed by expectations that OPEC could staunch a supply glut

Tesla's back-to-back price cuts bring sticker on U.S. Model S below $70,000
Business

Tesla's back-to-back price cuts bring sticker on U.S. Model S below $70,000

By Tina Bellon and C Nivedita (Reuters) - Tesla Inc will further cut the price of its Model S "Long Range" sedan in the United States to $69,420, the electric carmaker's chief executive, Elon Musk, announced in a tweet https://bit.ly/2H0JCP0 on Wednesday. The anticipated drop marks the second time this week Tesla has cut the price for the high-end sedan, following a 4% cut of the Model S's price in the United States on Tuesday to $71,990.

Trump cites teenaged son's bout with coronavirus in calling for schools to reopen
World

Trump cites teenaged son's bout with coronavirus in calling for schools to reopen

By Jeff Mason DES MOINES, Iowa (Reuters) - Under siege over his handling of the novel coronavirus pandemic, President Donald Trump on Wednesday cited what he said was his son's mild bout of the virus as a reason why American schools should reopen as soon as possible. Trump made the comment about his son, Barron, as the president swept into Iowa on a mission to shore up support in battleground states that he won in 2016 but is in danger of losing to Democrat Joe Biden barely three weeks before the election. First lady Melania Trump announced in a statement earlier in the day that the virus that struck both her and her husband had also infected their 14-year-old son