Low inflation readings mean the Federal Reserve can refrain from further tightening, possibly well into next year, Chicago Fed President Charles Evans said Monday.
“I do think that inflation is a little weaker than I would like to see,” Evans said in an interview on CNBC.
“Because inflation is a little bit lighter, the economy is doing fine...I can see the funds rate being flat and unchanged into the fall of 2020,” Evans said. “For me, that’s to help support the inflation outlook and make sure it’s sustainable.”
Evan said he was surprised by the weak inflation, saying that in the fourth quarter he has expected some upward price pressure.
The Chicago Fed president, who is a voting member of the Fed’s interest rate committee, said the first quarter is now looking “a little bit stronger” than it did at the start of the year.
This should ease concerns for anyone who was overly concerned about a downturn, he suggested
“The economy is doing solidly, I would say,” Evans said.
Asked if low inflation readings justified cutting interest rates, Evans replied: “It certainly argues against premature tightening, it argues against moving to a restrictive policy prematurely.”
It would take a “a negative shock” for him to make the case for easing monetary policy, he added.
The Dow Jones Industrial Average DJIA, -0.26% opened lower on Monday, falling about 50 points at the open. The yield on the 10-year Treasury TMUBMUSD10Y, -0.62% fell to 2.56%.