Charles Evans, president of the Chicago Federal Reserve, told The Washington City Times on Monday that employment and inflation will need to pick up significantly before he changes his stance on monetary policy.
Following Friday’s hugely disappointing jobs report, the central bank official said he still thinks the employment picture is strong, although there are still significant weaknesses.
“It’s a bit more complicated. We’re rebooting the economy. A lot of industries are experiencing growing pains,” Evans said on The Washington City Times’s “Squawk Box.” ‘Hopefully it will only take a month and we will get a better job. I think so. ‘
Nonfarm payrolls rose by only 266,000 in April, well below the estimate of 1 million. That left total employment more than 7.5 million under February 2020, the month before the Covid-19 pandemic statement.
Evans noted that the labor market continues to receive strong policy support from the trillions spent in Congress and the Fed’s own policies.
But as the economy improves, investors are starting to wonder when the Fed could pull back its measures. The central bank keeps short-term interest rates close to zero and continues to buy at least $ 120 billion in bonds every month.
Evans indicated that the main measures the Fed is watching – employment and inflation – remain many of the levels that would convince him to tighten.
“I think it will be some time before we actually see and assess it in the data,” he said. “I can’t give you a timetable.”
In addition to the weak number of jobs, inflation remains below the Fed’s average target of 2%. Evans said it will likely take months to reach that goal, adding that he would feel comfortable if inflation got a little high for a while.
“To have an average of 2%, you have to be above 2% for a while,” he said. “So a 2.5% inflation rate doesn’t bother me, as long as it’s consistent with an average of 2% over a period of time.”
While the market expects the Fed to at least slow down the pace of bond purchases in late 2021 or early next year, Evans has not made an estimate.
“We’ll just have to see how the data comes out this year,” he said. “If they’re stronger, if we’re close to our employment mandate and inflation picks up, we’ll talk about that.”
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