Evans: Inflation Not Rising To 2% “For A Few Years”

Evans: Inflation Not Rising To 2% “For A Few Years”
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In an interview with Bloomberg’s Michael McKee, which aired on Bloomberg Surveillance, Federal Reserve Bank of Chicago President Charles Evans says he doesn’t see inflation rising to 2% “for a few years.” He says he sees pressures holding down inflation and sees “many signs of continued resource slack.”

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Charles Evans? on inflation outlook and recent forecasts:

“Inflation, I think that the underlying fundamentals continue to indicate to me, my inflation outlook is for 1.5 to 1.75 for a couple of years.  And I don’t expect to get up to 2 percent for a few years.”

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“So I think there continues to be pressures that are going to hold that down.  If we get above 2 percent, then that will be a sign that things are doing better I think.  And you know, frankly, it is not a catastrophe to overshoot inflation by some amount.  Two percent is our target; that does not mean we have to stay below 2 percent..  We need to average 2 percent.  So even a 2.4 percent inflation rate, if it’s reasonably well-controlled and the rest of the economy is doing OK and then policy is being adjusted in order to keep that within the, you know, under 2.5 percent range, I think that can work out.”

Charles Evans on when inflation starts to be affected by unemployment:

“I think it is more like the normal rate that we used to think of before the crisis, something in the 5 to 5.25 percent unemployment rate.  That’s what I take to be the sustainable rate, so at 6.1 percent we still have quite a ways to go.”

Charles Evans on resource slack:

“I think that the low wage growth to date is indicative of that as well.  Plus the lower inflation.  So I think there are many signs of continued resource slack.”

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