MNI: Fed's Evans Says Approaching 'Substantial Progress'

Chicago Federal Reserve President Charles Evans said Tuesday the U.S. job market is nearing a point when Fed officials can declare enough progress has been achieved to begin reducing its USD120 billion in monthly asset purchases.

"We've made a lot of progress. The last two employment reports have been very strong," Evans told reporters during a press briefing. "I do expect that we're going to be at the point where we've seen substantial further progress -- probably later this year."

The Fed will meet next month to further discuss when and how to begin reducing its USD120 billion monthly purchases. MNI reported Tuesday that a September taper warning is increasingly likely following a blockbuster gain of 943,000 jobs last month.

STATE-CONTINGENT TAPER

Evans said the Fed's tapering of bond buys will not be "on a preset course" and could be adjusted if economic conditions shift.

"We absolutely can undertake a state-contingent policy move once we begin to taper asset purchases," he said, adding that the Fed said the same thing last time it reduced QE.

Evans said he's been surprised by recent price increases and expects core inflation to run above 3% this year. But he predicts core PCE will return to around the Fed's 2% target in 2022.

"I don't have strong confidence in what the sustainable inflation data is going to look like next year and in 2023. That's the largest uncertainty," he said. "I think employment is going to be good. I think the fiscal support is going to continue to be good. But inflation is going to have to behave differently over the next couple of years than it has over the last ten."