Federal Reserve Bank of Chicago President Charles Evans said he isn’t seeing threats of inflation and that the central bank can do more to boost growth and hiring even after it stepped up record stimulus last month.
“I don’t think we’ve seen inflationary concerns,” Evans said today in a CNBC interview. “We want to average 2 percent, but at the moment we’re under-running that.”
Evans, who doesn’t vote on policy this year, said that the Fed can do more to support the recovery and that he sees unemployment in the range of 7 percent by the end of 2014. He said the central bank can “back off” of its accommodation should inflation present a greater threat.
“There’s scope for doing more,” he said. “I would have been doing more for a longer period of time.”
Policy makers are attacking unemployment with an unprecedented commitment to buy $40 billion of mortgage debt a month in a third round of quantitative easing until the labor market shows sustained improvement. The Federal Open Market Committee also said last month it will probably will hold the federal funds rate near zero “at least through mid-2015.”
In June, the Fed extended Operation Twist, selling about $45 billion of short-term Treasury securities a month and buying about $45 billion of longer-term Treasuries. The Fed said it will continue the program through the end of the year.
Evans said today that the pace of $85 billion in purchases of longer-duration mortgage-backed securities and Treasury securities may be appropriate through the end of 2013.
“It’s going to take almost a year in order to see the type of improvement in labor markets that I’m expecting, just getting through the first half of next year with the headwinds that we’re facing, I think that it’s probably later in 2013 that we would get there.” Evans said. “In my opinion we’d continue with those asset purchases until we see payroll employment more like 200,000 to 250,000” new jobs per month.
The Labor Department said Sept. 7 that the economy added 96,000 jobs in August, less than forecast by economists and down from a 141,000 increase in July. The Oct. 5 jobs report may show employers added 115,000 jobs in September, according to the median of 25 economist estimates in a Bloomberg survey.