MNI POLICY: Fed's Evans-No Urgency to Ramp Up QE Now

Stepping up asset purchases will have a limited effect on already-low borrowing costs now, but the Fed could consider offering further accommodation later in the recovery, Federal Reserve Bank of Chicago President Charles Evans told reporters Tuesday.

Monetary policy "could lower borrowing costs somewhat, but borrowing costs are already probably about as low as they're going to go for the moment," Evans said. "I don't see the same kind of necessity or opportunity like we saw in 2010 and 2012 when interest rates were higher and we were really activating the portfolio balance effect."

"We could get to a point where, a little further along, interest rates are higher on the longer end, and we're within shouting range of 5% unemployment, and we can continue to provide a little more accommodation," he said. That could take the form of higher volumes of purchases or a lengthening in the maturities structure of purchases, he added, echoing comments from former Fed officials.

"Since we've been buying across the curve, we could have some opportunity to extend the duration just with the same pace we got, that's a possibility," he said via a video call with media.

Public health safety, distancing and using masks are the first line of defense against economic deterioration, Evans said. And while he expects the unemployment rate to continue falling toward 5.5% a year from now, a return to strong numbers on aggregate would "belie uneven outcomes" where lower income households bear the brunt of adverse economic and health consequences, Evans said.

That relatively upbeat forecast assumes another trillion dollars of fiscal aid, Evans said. If aid were delayed but were still delivered next year, his outlook would not change. "I'm still hoping something comes along," he said.