Slow removal of monetary policy accommodation will help raise inflation to 2%, according to Federal Reserve Bank of Chicago President Charles Evans.
“In my view, slow removal of accommodation by the FOMC is necessary to boost inflation and symmetrically achieve our 2 percent inflation goal in a timely fashion,” Evans said in prepared remarks he was to deliver in Idaho, but didn’t because of weather issues. “We also have to assure the public that we are concerned about the current challenges to our inflation objective and that we are not overly conservative central bankers who view our inflation target as a ceiling.”
And since the nation could be dealing with risks related to zero lower-bound policy, “risk-management considerations argue for tilting toward accommodative policies that help reduce the odds of returning to the ZLB,” he said.
While it is not clear how many rate hikes will actually come this year (there could “be two rate hikes this year or three or even four”) or when balance sheet tapering will begin, Evans said, “the important feature is that the current environment supports very gradual rate hikes and slow predetermined reductions in our balance sheet.”