MNI POLICY: Fed May Hold Rates to 2024, Need Fiscal Help-Evans

The Federal Reserve could extend the duration of the assets it purchases to support the economy, adding it would be better for fiscal policy to "go big" with the central bank potentially holding near-zero interest rates into 2024, Chicago President Charles Evans said Monday.

Negative interest rates aren't being contemplated so extending the duration of purchases or even selling short-term assets in exchange for longer-term ones could be another way to help out, Evans told reporters. He didn't give a timeframe for when such a move might be needed.

The lack of fiscal action could create problems for the jobs recovery, struggling small business owners and cause state and local governments to step up layoffs, Evans said. He also said conditions could be "uneven" in the next few months and it would take until next spring to figure out the economy's underlying momentum.

"We should go big" on fiscal action, Evans said in response to a question from MNI. "Going larger like we have with other administrations at other times would be good."

At an earlier event, Evans said one reason he sees rates on hold for several years is the need to avoid cutting off potential gains in the job market because of a worry that inflation is taking off. Price gains may not reach 2% until 2022 or perhaps 2023, followed by period of overshooting the Fed has promised, he said.

"You put all that together and I think that's about right, that we aren't expecting the funds rate to be raised before 2023, probably late, maybe even 2024, in my opinion."

"It's a good thing when the economy is running with a vibrant labor market, so we shouldn't preempt a good recovery," he said.

The FOMC's September projections showed officials saw the benchmark rate unchanged into 2023, as far out as they made forecasts.