Tuesday, October 5, 2010

Fed's Evans: It's Time for a Lot More Inflation

The U.S. Federal Reserve should do "much more" monetary easing to spur a sluggish economic recovery, a top Fed official said in an interview published by WSJ.

"In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should," Chicago Federal Reserve Bank President Charles Evans told the Wall Street Journal.

"This is a far grimmer forecast than we ought to have," he said, for which reason he favors "much more accommodation than we've put in place."

Get a load of this part:

Evans said he is in favor of more asset purchases but added he worries that alone would not be enough, the Journal reported.

He said the Fed should consider ways to push inflation higher in order to bring down the real cost of credit.

He said the Fed might aim to overshoot its informal 2 percent inflation target for a time to make up for lost ground, the Journal reported. New York Fed President William Dudley has also suggested the Fed consider this tool, known as price-level targeting.

"That is a potentially useful policy tool at this point and I definitely think we should study it more," Evans said.

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