Interest rates should stay where they are as long as inflation remains tame, Chicago Federal Reserve President Charles Evans said Friday.
“We really need to keep our eye on inflation,” the central bank official said. “And unless it starts to go up to something that is consistent with our 2% symmetric inflation objective, I think we are pretty well set for policy.”
Evans made his comments to CNBC’s Steve Liesman at an American Economic Association meeting in San Diego. A few weeks earlier, the Fed voted to hold its benchmark rate steady in a range of 1.5%-1.75% and indicated that there likely will not be any moves in 2020 as long as economic data remains consistent.
In all, the policymaking Federal Open Market Committee reduced the overnight funds rate three times in 2019, in a pattern that officials deemed a midcycle adjustment and insurance against potential economic weakness both domestically and abroad.
If anything, Evans left the door open to additional cuts this year. He is no longer a voting member for the FOMC, but he does have input during deliberations and will be providing quarterly forecasts of where the economy is heading and how policy should respond.
“We’ve been under-running our 2% objective for quite some time,” he said. “We should have seen inflation. There must be so much more at work that we may need more accommodative monetary policy.”
Evans pronounced the economy generally and the labor market specifically in otherwise good shape, saying he expects to see GDP growth this year of about 2.25%, above the 1.75% that he thinks represents long-term potential.