By Bill Sokolis
CHICAGO (MNI) – Chicago Federal Reserve President and FOMC voting
member Charles Evans Monday reiterated continued accommodative monetary
policy will be necessary for the economy to reach escape velocity and
that may not be happening by mid 2013.
Highlighting a “Risk Management Approach to Monetary Policy,” at an
annual outlook luncheon in Muncie, Indiana, Evans said it was
“imperative to address cyclical challenges” to the economy, “as quickly
as possible,” during a brief question and answer periods with public and
press
Believing the economy is likely to be in the midst of a “liquidity
trap” as opposed to a “structural impediments” scenario, Evans suggested
leaving the funds rate low “for some time” while “inflation of 3% over
medium term not unlikely.” Economic improvement within the mid-2013
window of current forward guidance may be unlikely.
Evans continued to mirror dovish sentiment in espousing further
accommodation to kick-start the economy. The ecomomy will be “facing hard
choices for some time,” Evans said, though some choices “tend to get
punted down the road.”
“Choosing the correct inflation target is essential,” Evans said.
Though unlikely, 3% inflation and/or an “unemployment rate below
7%” would trigger “safeguards” to reduce accommodation as oulined in a
“State Contingent” policy during his speech.
Evans said “China is a strong growth component for global demand,”
while the American consumer is not. At the moment, there is a “need
someone other than the American consumer as an engine for global
demand.”
When asked about tax amnesty for repatriation of corporate profits,
Evans dithered, but suggested putting a broad tax policy in place, and
keep it that way.”
As to current liquidity issues assailing the European community,
Evans said “at the moment, we are all holding our breath.”
** Market News International Chicago Bureau: 708-784-1849 }
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