Federal Reserve Bank of Chicago President Charles Evans urged easier monetary policy and said he favors setting unemployment and inflation markers that would trigger a pullback from near-zero interest rates.
“I would favor more accommodation,” Evans, a voting member of the Fed’s policy-making committee, said today in a CNBC television interview. “I am in favor of some of the most aggressive policy actions of anyone on the committee.”
Chairman Ben S. Bernanke said last week in a speech at a Fed conference at Jackson Hole, Wyoming, that the central bank still has stimulus tools, while not providing details or committing to deploying them. Policy makers will meet for two days next month to “allow a fuller discussion” of the economy and the Fed’s possible response, he said.
“I am somewhat nervous about the economic recovery and where we stand at this point,” Evans said. “The first half of this year got revised down and we had very weak growth. We had been hoping to achieve something much more like a launch or escape velocity for growth.”
The policy-making Federal Open Market Committee will be able to review additional economic reports before its Sept. 20-21 meeting. The U.S. economy expanded at a 1 percent annual rate from April through June, down from a 1.3 percent prior estimate, revised Commerce Department figures showed last week in Washington.
Evans said he “would have wanted to do more” easing earlier this month, when the Fed decided to commit to keeping its target rate near zero through mid-2013. The commitment is conditioned on “low rates of resource utilization and a subdued outlook for inflation,” which Evans said may be too vague.
“One thing I think we really ought to do is clarify what our policy intentions are going forward,” he said. “It is conditional. I think we need to explain what we mean by that conditionality.”
An improvement would be to detail “the economic markers” that would require a policy change. “We could allow rates to remain low until the unemployment rate fell to a certain level, maybe 7.5 percent, maybe 7 percent” or “if inflation became tremendously unacceptable” which could mean medium-term inflation at more than 3 percent.
“If we could sort of make everyone understand that this is going to be in place for a longer period of time, we would knock out some of that restraint that comes about when people talk about premature tightening,” Evans said.
Any new easing could face more opposition from some Fed presidents. Dallas Fed President Richard Fisher, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis voted against the August statement that pledged to keep rates near zero at least until mid-2013. The last time three voters dissented was on Nov. 17, 1992, under Bernanke’s predecessor, Alan Greenspan.
“Employment growth has been very weak,” the Chicago Fed leader said. “The economy has been growing, but it is a small positive. We are really going sideways more than anything else.
‘‘The labor market -- with 9.1 percent unemployment -- we haven’t experienced rates like that which haven’t been associated with recession. This is not a good situation.”
Payrolls may have climbed by 75,000 workers in August after a 117,000 increase in July, and the unemployment rate probably held at 9.1 percent, according to the median forecasts of economists surveyed by Bloomberg News before Labor Department data Sept. 2.
“Inflationary pressures are not nearly as strong as a lot of people think,” Evans said.
While the most recent consumer spending report was “pretty good,” most other economic reports, including manufacturing surveys, have shown continued weakness into the third quarter, he said.
“I really don’t need to see a lot more data to understand that we haven’t achieved escape velocity,” he said. “We need to do better.”
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