Federal Reserve Bank of Chicago President Charles Evans said the U.S. economy hasn’t reached “escape velocity” and that monetary policy can remain easy until unemployment falls to 7 percent.
“No matter which explanation seems to be at work, we can continue to push accommodative policy” until joblessness falls from the current level of 8.6 percent, he said during a panel discussion today near Florence, Italy.
Evans’s remarks are his first since he voted against the rest of the Federal Open Market Committee’s Dec. 13 decision to keep monetary policy unchanged, preferring additional stimulus instead. The Chicago Fed chief is the only policy maker this year to break from FOMC ranks in favor of further action to boost the economy.
“We are not even close” to above-trend growth, the policy maker told reporters after the panel, held at the European University Institute. Evans said he’s also not convinced by the latest trend in economic data.
Some statistics are signaling that growth may be picking up. The fewest workers in three years filed claims for jobless benefits for the week ended Dec. 10, according to Labor Department figures issued yesterday in Washington. Other reports showed manufacturing accelerated this month after pausing in November.
Job gains picked up last month, and the unemployment rate unexpectedly fell to the lowest level since March 2009. Payrolls climbed 120,000 after a revised 100,000 increase in October.
Inflation has decelerated, based on the Fed’s preferred measure, the personal consumption expenditures price index excluding food and energy. That gauge rose 0.07 percent in October from September, the second-slowest gain in 2011.
The central bank refrained from taking new steps this week to lower borrowing costs. It retained a pledge to keep the benchmark U.S. interest rate “exceptionally low” at least through mid-2013. Fed officials lowered the target for the overnight lending rate between banks to zero to 0.25 percent in December 2008.
Stocks fell after the Fed’s statement three days ago.
Shares pared gains today, wiping out a 99-point increase in the Dow Jones Industrial Average, as optimism about the European crisis fizzled. The Standard & Poor’s 500 Index added 0.2 percent to 1,218.05 at 2:08 p.m. New York time, trimming its advance from 1.3 percent.
The 53-year-old regional bank chief proposed earlier this year to keep the fed funds rate near zero until either unemployment falls below 7 percent or the medium-term inflation outlook rises above 3 percent. He has also said he would support more asset purchases if those objectives aren’t reached.