U.S. Fed can start tapering 'later this year,' says Evans
GREENVILLE, S.C., Sept 6 (Reuters) - The U.S. Federal Reserve can begin winding down its bond-buying stimulus plan later this year as the economy improves, but will likely need to keep official interest rates near zero for another two years, Chicago Fed President Charles Evans said on Friday.
Evans said he was hopeful U.S. economic growth would finally break above 3 percent following several years of lackluster recovery from a deep recession. He said inflation should slowly creep higher toward the central bank's 2 percent objective.
While he did not specify an exact month for the start of a reduction in the Fed's purchases of mortgage and Treasury bonds, his timeline appeared to make Evans reticent about making such a move at the central bank's next policy meeting in September, as most investors now expect.
"I do expect, however, that the outlook will materialize in such a way that we'd likely reduce the (asset purchase) rate starting later this year and subsequently wind down these purchases over a couple of stages," he told an event sponsored by AgFirst Farm Credit Bank.
"For me, to start the wind-down, it will be best to have confidence that the incoming data show that economic growth gained traction during the third quarter of this year and that the transitory factors that we think have held down inflation really do turn out to be transitory," said Evans, who is a voting member this year on the Fed's policy-setting Federal Open Market Committee.