HONG KONG — Chicago Federal Reserve Bank President Charles Evans reiterated Monday that the Federal Open Market Committee needs to take its symmetrical approach strategy more seriously.
During a question and answer session following a seminar here, Evans said, "A lot of times we think 2.2% inflation is intolerable, (but) that's really saying we are targeting something less than 2%."
"That's not what we agreed upon. In our strategy we discussed a balanced approach and we just have to go out and talk about this repeatedly."
In January this year, the Fed issued a formal policy statement in which it set 2% as its medium-term inflation goal. Evans noted that Fed Chairman Ben Bernanke said at its press conference in April that the inflation goal was "symmetrical," meaning that deviations above or below 2% would receive equal policy attention and that 2% was not a ceiling.
In his speech earlier, Evans said the FOMC needs to "take symmetry seriously."
"If we disproportionately recoil at inflation a little above 2% versus a little below, then we are not symmetrically weighing policy misses. And we will not average 2% inflation, which is our goal."
"Inflation is a process that cannot be completely controlled," Evans said in response to a question.
On the U.S. unemployment numbers, Evans said he was not expecting the jobless rate to fall below 7% before 2015 at the earliest.
Evans also continued to push his preference for additional monetary accommodation to help support the U.S. economy, saying a third round of quantitative easing was needed to insulate the U.S. economy from further shocks.
On the Federal Open Market Committee's aim of keeping the benchmark Fed funds rate low until 2014, Evans said although that timeline was "better than nothing," the FOMC should continue to clarify its forward guidance. Specifically, he recommended the FOMC adopt a "7-3" policy, under which it would make clear in its communications that it would not start to tight policy until unemployment fell below 7% or inflation rose above 3%, whichever came first.
Evans also touched on the Chinese economy following his visit to Beijing last week, saying a step down in Chinese economic growth was "unhelpful" for the global economy given the size of the Chinese economy and the difficulties being faced by the European and U.S. economies.
Evans, however, wouldn't be drawn into commenting on anything he learned in the Chinese capital efforts by the Chinese government to shore up growth, merely saying the government there was looking at "different ways" to counter the slowdown.
Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.