MNI:Evans Challenges Inflation Hawks to Define Credible Danger

Chicago Fed President Charles Evans on Wednesday challenged critics of the Fed's plans to maintain near-zero interest rates to show more detailed scenarios proving inflation will get out of hand as the economy rebounds.

"I wish people would fill in the dots" when they make this argument, he told reporters after a speech. Some critics appear to be talking about scenarios from decades long past when there were fears price gains could surge beyond 10%, he said.

"I just don't see that progression" of runaway inflation, Evans said. "I don't see in place the building blocks" for inflation sustained even at a rate of 2.5% or 3%, he said.

Anecdotes about businesses hiking wages or paying bonuses to lure back reluctant workers also don't appear to be a clear case of sustained inflation pressure, Evans said. He's also "agnostic" on the monetary policy implications of any rise in the portion of national income drawn by workers.

Market bets the Fed may raise interest rates sooner than policy makers have projected aren't something the FOMC should chase, he said. "We want to see the outcomes and not get unhelpfully ahead of where the economy is going," Evans said.

Fiscal stimulus is helping boost economic growth but downside risks from Covid-19 variants haven't been eliminated, he said. It's unclear when policy makers should begin discussing the scaling back of bond purchases that are still helping signal the Fed's intentions, Evans said.

"I'm not in a hurry in any way to have that discussion," he said. "Patience is really an important tool for quite some time."