HIGHLIGHTS: Fed's Evans on need for more accommodation
CHICAGO, June 27 |
CHICAGO, June 27 (Reuters) - Chicago Federal Reserve Bank President Charles Evans on Wednesday reiterated his call for further monetary policy easing to fight high U.S. joblessness, just one week after the Federal Reserve added six months to "Operation Twist," a program aimed at lowering borrowing costs by extending the maturity of the Fed's bond-holdings.
It also reiterated its projection it will need to keep short-term interest rates near zero until at least late 2014.
Below are excerpts from Evans' interview with a small group of reporters at the Chicago Fed's headquarters. For full story, see :
On the need for more policy accommodation:
"I think we should be doing more accommodation than what was adopted under the Twist, but I also had said that in the current environment that any amount of additional accommodation is welcome, so I took some comfort in that regard. I think that we would be well-served if in addition to the maturity extension we clarified our forward guidance so that the public could better understand how long we are likely to have these types of policies in place."
"I think the case is there, but there are many viewpoints expressed by my colleagues."
"I'd like to have more accommodation. I'd be willing to do more on the basis of the current data."
On achieving the Fed's two goals in a "balanced" way:
"I think if you look at our projections and the SEPs (summary of economic projections), it's hard to understand why we wouldn't be willing to do more, because the inflation outlook is lower than our objection. That when we are doing as badly as we are on our real side mandate, a balanced approach, I don't see any other way to interpret it. But I know other people disagree with this.
"I think that a balanced approach means I'd be willing to undertake accommodative policies at some risk of increased inflation -- it's below our target -- at some risk of increasing it above that by some amount. How much? How much? That's a fair question. We are not offering very much in delineating that.
On the late-2014 language in the statement:
"If you examine the commentary from most of my colleagues, there is a little bit of dissatisfaction on most everybody's part with the calendar-date language."
On the economy:
"I am not satisfied with the pace of improvement in the economy...My own outlook, we marked it down on the basis of the weaker data. I'd been saying, before the meeting, that our forecast had been for 2.5 percent to 3 percent growth over the next two years, now it's more like 2 to 2.5 percent over the next two years.
"The economy is growing, there is no doubt about that, but we are a lot closer to being in a position where the economy, where growth could stall, and given all the risks that we are facing, that's a very unfortunate place to be, from a risk perspective."
On policy preferences:
"I'd be willing to do more asset purchases. I'd prefer to clarify our forward guidance, and then indicate that we'd like to see progress, and then if the progress isn't being met, have a plan of purchases -- it could be Treasuries, it could be MBS (mortgage-backed securities) -- that we really intend to improve things."
On the labor market:
"The labor market situation has been completely unsatisfactory."
On effectiveness of Operation Twist:
"I think it probably has small effects. At the moment I think the larger effect is that it indicates that the Fed is continuing to think that more accommodation is important and worthwhile."
On mortgage refinancing:
"If we could get it going faster it would be self-perpetuating, it would feed upon itself...If somebody could address that, that would have a beneficital effect on growth, and then the current level of accommodation would be even more powerful than it is."
On the size of the Fed's balance sheet:
"I'm worried that there is not as much monetary accommodation in place as the size of our balance sheet would suggest."
On the Fed's new communications strategy:
"I think it's prudent to continue to assess how that is working for us, how that fits with any ideas that we have to alter the stance of monetary policy going forward... We are trying to understand the implications of what we've put in place, and whether or not there are simple enhancements, or alternative enhancements, that could improve things."
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