By Steven K. Beckner
(MaceNews) – Chicago Fed President Charles Evans strongly doubted whether current elevated inflation will be sustained and stressed the need for the Fed to keep striving to overshoot the 2% average inflation target to lift inflation expectations rather than just hoping higher inflation will be perpetuated by “accidental” forces like transitory supply constraints.
Evans said he thinks the “substantial further progress” standard for tapering is “close” to being met, but said the timing of liftoff is “much less clear.”
“(B)y itself, a low unemployment rate would not dictate a change in policy rates. If not associated with an undesirable rate of inflation, I would be hard-pressed to be convinced that some kind of labor market dysfunctionality, such as widespread unproductive churning, would offset the benefits that low unemployment brings to American households. ….
Evans again argued the Fed needs to be doing more, including through its communications, to convince markets and the public that it is determined to overshoot inflation in order to build up inflation expectations.
He said he is “more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.”