UPDATE 2-Tough to make taper call at December Fed meeting -Evans

Monday, 21 Oct 2013 | 9:34 AM ET

WASHINGTON, Oct 21 (Reuters) - It will be "tough" for the Federal Reserve to have sufficient confidence in the strength of the U.S. recovery by its meeting in December to start scaling back a massive Fed bond-buying campaign, a senior U.S. central banker said on Monday.

"October is a tough one. December? I think we need a couple of good labor reports and evidence of increasing growth, GDP growth. It is probably going to take a few months to sort that one out," Chicago Federal Reserve President Charles Evans told CNBC television in an interview.

The Fed is buying $85 billion in Treasuries and mortgage-backed securities every month to keep interest rates low and stimulate economic recovery in the United States.

Fed officials hold their next policy meetings this month and then in December. Evans, one of the most dovish among the 19-member policy-setting committee, is a voter this year.

"It is very difficult to feel confident in December given that we're going to repeat part of what just took place in Washington," Evans said.

A bitter partisan fight between President Barack Obama's Democrats and conservative Tea Party Republicans resulted in a 16-day government shutdown that was only lifted last week in a last-ditch deal that narrowly averted a harmful U.S. debt default.

However, that compromise only agreed to fund the federal government until Jan. 15 and raise the federal borrowing limit until Feb. 7, meaning that the fiscal drama will potentially resume in the new year.

"So December will be pretty tough and we could in fact get more restrictiveness. We've seen the government lop off more than a percentage point from growth this year by many estimates," he said, referring to the fiscal headwind caused by tax hikes and government spending cuts.

The Fed has held interest rates near zero since late 2008 and quadrupled the size of its balance sheet to around $3.7 trillion through three massive bond-buying campaigns aimed at holding down long-term U.S. borrowing costs.

The Fed stunned markets in September when it opted to keep buying bonds at the $85 billion monthly pace, after announcing in June it expected to start tapering these purchases before the end of year, and to end the program by mid-2014.

Evans acknowledged the delay but said it did not necessarily mean the Fed would not be able to end bond buying on time.

"If things really started to take off. If various actors in the economy stepped back and let the business community really take hold, and consumers too, we could see a big expansion in growth," Evans said. "Then we could pull back that much more quickly - delayed at the beginning, but then we could do it faster at the end," he said.