Fed’s Evans: near-zero rates currently appropriate

BLOOMINGTON, Ill., May 14 (BestGrowthStock) – While moderate U.S.
economic growth and relatively stable inflation continue to
make the Federal Reserve’s current near-zero interest rate
target appropriate, that stance will eventually need to change,
a top Fed official said on Friday.

The U.S. economy is on track for a moderate 3.5 percent
gain this year, and unemployment will likely remain stubbornly
high, Chicago Fed President Charles Evans said in the text of a
speech for delivery at Illinois Wesleyan University. That,
coupled with tight bank credit and inflation running well below
his guideline of 2 percent, suggests the economy continues to
need the support of low interest rates.

“Currently policy is, appropriately, very accommodative,”
Evans said. “But, eventually, we will have to return to a more
normal stance. Judging the appropriate timing and pace for
reducing accommodation poses a significant challenge for
policymakers over the next couple years.”

The Fed lowered its key short-term interest-rate target to
near zero in December 2008 and began pumping more than $1
trillion into the economy through purchases of mortgage-backed
securities to help ease the worst downturn in decades.

The central bank’s policy-setting Federal Open Market
Committee on April 28 renewed its pledge to keep rates low for
an extended period.

But job growth may be near a turning point, and any
surprises to current growth forecasts are likely to be to the
upside, Evans said.

Evans is not a voting member of the FOMC this year.

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(Reporting by Ann Saphir, Editing by Chizu Nomiyama)

Fed’s Evans: near-zero rates currently appropriate