A Federal Reserve Member Is Open-minded about Rate Cuts

A few days after one member of the Federal Reserve said it should cool down another comes out to argue. Charles Evans, president of the Federal Reserve Bank of Chicago, says he is open-minded on further easing policy.

Yes Its 50 Basis Points, But Could Go Further

Mr. Evans agrees that the Federal Reserve has done quite a lot of shrinking interest rates twice this year, but believes more is possible. Evans, who is renowned for his dovish views on the Fed, suggested that the ideal interest rate should be a moving target.

In what he described as the Fed moving the US into an accommodative stance, he said the economy should be able to adjust. Evans advocated sticking to U.S. fundamentals even as headwinds keep increasing in the face of the trade war.

Evans is also of the idea that the ideal monetary policy is possible if the applied policies are below the neutral rates. He says that if kept below these neutral rates region, then the necessary accommodation for the economy is possible.

Challenges Tweaking Inflation Rate

Mr. Evans came out clean to say that the Fed has had challenges trying to get the inflation rate at 2%. Currently and for a while, it has been trailing at the 1.7% mark and below. The challenge he says is contributing to growing uncertainty. It gets worse by the fact that both the U.S. and China economies are shrinking, but no negotiations are taking place. Earlier in September, the market was optimistic that the two countries would negotiate. That was never to happen.

Evans is, however, of the opinion that what the Fed has done already might be sufficient. He, however, pointed to inflation and labor market data as crucial to making the right conclusion.

Boneheads

The Federal Reserve has attempted to implement an interest rate cut, and its latest 25 basis point reduction is causing division. Some of the policymakers are of the idea the interest rates can reduce further while some dissent.

Evans has called the Fed chairperson, Jerome Powell, and other policymakers ‘boneheads’. With this claim, Evans joins the list of high profile individuals who have lashed at the Fed for how it conducts its business.

President Trump in September said that the Fed lacks the guts to lower the interest rates. In the next policy meeting that the Fed held after that, they cut the interest rate by 25 basis points. This does not seem to have changed the President’s sentiment. Trump is still of the idea that the Fed is exposing the US economy to risk by maintaining high-interest rates.

Evans, however, remains hopeful that the US economy will be able to ride the headwinds that come its way. He, however, affirms that the possibility of uncertainty continues to linger. Should there be a shock; the US economy is likely to take a hit. His statement has weight considering the recent manufacturing data that shows the US is taking a hit from the trade war. Manufacturing shrunk for the first time in 35 months.