MNI POLICY: Fed's Evans Says More Forward Guidance Premature

Chicago Fed President Charles Evans sees little need for the Federal Reserve to provide more explicit forward guidance on when it might lift interest rates from near-zero, he told reporters Monday, noting that high-frequency economic data has also flattened out in recent weeks.

"At the moment I don't see anybody thinking that we are going to raise rates. The summary of economic projections has been pretty clear," Evans said.

He said however that the post-financial crisis model for guidance, which conditioned zero rates on hitting a 6.5% unemployment and 2% inflation target, "isn't that bad" a model going forward, adding that perhaps the unemployment target from years ago should have been 5.5% or "maybe lower."

Unless inflation "starts heading up to 2.5%, I am not going to really see a need for the funds rate to be increasing as long as we can still drive unemployment lower, get more people into the workforce, we can recover from some of what we just experienced," Evans said. He votes on rates next year.

"That is the type of forward guidance I know I would be arguing for but its kind of premature at this point," he said.

OUTCOME-BASED QE

"I do suspect that signalling is going to be a big part of the rationale. Certainly for me it will be," he said. "When we decide it's useful to provide more forward guidance or contingent purchases or yield curve control or whatever it is then, yeah, that would be useful."

DATA NOT AS POSITIVE

But "there is reason to believe that the data are not as positive" since June, he said, adding that he has not put it into a forecast. "There is reason to believe that the high-frequency data have indicated that people are a little bit more nervous about virus spread and that things have flattened out."

"I would say that I haven't really altered my outlook but I will tell you that I am emphasizing the different scenarios," he said.