MNI BRIEF: Evans Says Spell of 3% Inflation May Not Be Problem

Chicago Federal Reserve President Charles Evans said Wednesday there's little evidence that inflation will badly overshoot the central bank's 2% goal and the bigger challenge is overcoming a much longer history of price gains lagging the target.

Even a brief period of 3% inflation may not be a major concern in a time when the pandemic is causing a reset of relative prices across industries, and it could even help the Fed meet its goal of averaging inflation over time, he said. Inflation expectations are also "really anchored in a very different and much better place" than past eras of rapid inflation, he said.

"I don't think there's a great risk," of a major inflation overshoot, Evans said. "The responsiveness of inflation to the economy isn't what it used to be." The economy is set for a big rebound this year along with vaccine rollouts and fiscal stimulus, with unemployment moving down to about 5%, he said.