'A Lot of Reason' for More Easing, Says Fed's Evans
As optimism over additional stimulus from the U.S. central bank faded overnight, Chicago Fed President Charles Evans reiterated calls for further easing on CNBC Friday, arguing that there’s “a lot of reason to do more.”
U.S. stocks ended near session lows Thursday after St. Louis Fed President James Bullard dampened expectations for further monetary easing, saying current economic conditions are not weak enough and called the latest meeting minutes that hinted at more easing "stale.”
Evans, however, says he has a different view of how the economy is proceeding.
“The outlook for growth is 2 percent, if we are lucky 2.5 percent over the next 18 months to 2 years. Back in the Spring we thought it was going to be 2.5-3 percent…we stepped down our outlook, unemployment is 8.3 percent, there’s a lot of reason to do more,” he told CNBC Asia’s “Squawk Box.”
Fears of stalling economic growth in the U.S. have been growing after gross domestic product (GDP) slowed to 1.5 percent in the second quarter. A recovery in employment has also failed to pick up, with jobs growth slowing sharply in the April-June period to just 75,000 jobs per month from 226,000 in the first quarter.
Responding to the opposing call by his colleague Bullard, he says it’s important that the Fed provides clarity on its intentions and “reduces uncertainty” over its guidance.
“We’re facing extraordinary risks that are holding up businesses and households from making future investments…one uncertainty we can clarify is that we could announce clear, conditional economic markers that would prevent markets and business people from thinking that we would prematurely withdraw from our current accommodative stance,” Evans said.
According to Evans, as long as the unemployment rate is above 7 percent and inflation remains below 3 percent, rates should remain at zero percent.
Done Deal?
Earlier this week, markets gained traction after the latest minutes from the FOMC minutes showed many policymakers said additional accommodation is likely needed "fairly soon" unless the economy improves substantially.
Market experts including Pimco’s Co-Founder Bill Gross believe further monetary policy easing is a “done deal.”
Gross told CNBC when the central bank does act, he expects “a relative open-ended program in terms of size, in terms of time and in terms of what the asset classes is they buy.”
