Chicago Federal Reserve Bank President Charles Evans on Thursday suggested that ...
MEXICO CITY - Chicago Federal Reserve Bank President Charles Evans on Thursday suggested that “extraordinary accommodation” and a period of elevated inflation will be integral to the U.S. central bank’s approach to fighting the next severe economic downturn.
Instead he discussed the implications of sluggish economic growth and a related decline in the level of interest rates suitable for a healthy economy, both of which are conspiring to push down on inflation. That in turn pinches the Fed’s ability to respond to economic shocks with its traditional policy-rate lever, because interest rates can only be cut so far before they reach zero.
And to counter the tendency for inflation to be low, he said, the Fed must “convey to the public that periods with above-target inflation are essential to achieving the dual mandate goals over the long run,” Evans said.
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