Federal Reserve Chicago President on Rates and the Economy

Federal Reserve Bank of Chicago President Charles Evans said the U.S. unemployment rate will probably rise above 10 percent and inflation may stay below his preferred level for years, making it difficult to know when to "remove policy accommodation", or raise rates and stop other intervention. “The biggest challenge for all of us is very high unemployment,” Evans, who votes on rates this year, said today during a speech in Ann Arbor, Michigan. Determining when to reverse the Fed’s accommodative stance “is probably not going to be quite so apparent.”

Central bankers saw many parts of the U.S. economy stabilize or make modest gains in areas such as housing and manufacturing, according to the Fed’s Beige Book business survey released yesterday. The survey suggests that the economy is gaining momentum and has not yet overcome weaknesses in banking and employment. “My own outlook is for the economy to grow at about 3 percent over the next 18 months,” Evans told an audience gathered at the University of Michigan, Ann Arbor. Inflation should remain around 1.5 percent for the next couple of years, below the 2 percent level that’s consistent with price stability, he said. Recent movements in the dollar haven’t been “large enough” to alter the outlook for inflation, Evans told reporters afterward. Even so, “it’s obviously something we’re going to monitor,” he said.