SENIOR Federal Reserve official Charles Evans, one of the US central bank’s strongest advocates for further monetary policy easing, said yesterday he is flummoxed by the Fed’s timidity in the face of high unemployment and relatively low inflation.
At its policy-setting meeting last week, Fed officials sharply slashed their GDP forecasts for 2012 and 2013 and marked down the outlook for inflation.
Those changes to the US central bank’s summary of economic projections, or SEP, suggest progress on its twin goals of full employment and stable prices is slowing if not stalled.
Instead of reacting with a new round of bond buying to boost jobs, the Fed took the much more modest step of adding six months to an existing program, known as Operation Twist, that is aimed at lowering long-term interest rates.
"I think if you look at our projections and the SEPs, it’s hard to understand why we wouldn’t be willing to do more because the inflation outlook is lower than our objective,” said Evans, the president of Chicago’s Federal Reserve Bank.
With unemployment at the “completely unacceptable” level of 8.2 per cent and inflation predicted to decline, the Fed should be ramping up even more its already significant level of accommodation, Evans said.
City A.M. Reporter