The Korea Herald

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Fed’s Evans sees dangers from premature hike

By Korea Herald

Published : Sept. 25, 2014 - 21:07

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WASHINGTON (AP) ― A Federal Reserve policymaker said Wednesday that the central bank should be “exceptionally patient’’ before raising interest rates, even if it means overshooting the Fed’s inflation target for a time because the risks of moving too quickly remain sizable.

Charles Evans, the president of the Fed’s Chicago regional bank, said that despite improvements in the job market, the economy still needs help from the prolonged period of low rates. He cited examples of central banks that have lifted rates too soon and then faced bigger problems in jump-starting economic growth.

Evans is one of the Fed’s most vocal “doves,’’ officials who believe inflation is a distant threat and that central banks’ major goal remains boosting a weak jobs market.

“We should be exceptionally patient in adjusting the stance of U.S. monetary policy ― even to the point of allowing a modest overshooting of our inflation target ― to appropriately balance the risks of our policy objectives,’’ Evans said in a speech at the Peterson Institute for International Economics in Washington.

The Fed last week voted 8-2 to keep its key short-term rate at a record low near zero and retained language that it expected it to remain at that level for a “considerable time’’ after it ends a third round of bond purchases at its next meeting in October. The bond purchases have been aimed at keeping long-term rates low.

The two Fed officials who voted against the Fed action, Charles Plosser, president of the Philadelphia Fed, and Richard Fisher, president of the Dallas Fed, both objected to the decision to signal “considerable time’’ before the first rate increase. Plosser and Fisher are leading hawks, Fed officials who are concerned that low-interest rates could generate unwanted inflation pressures down the road.