Reply #84: Evans says Fed could delay ending low rates: reports [View All]

http://www.marketwatch.com/story/evans-fed-could-delay-ending-low-rates-2010-05-31-54300?siteid=YAHOOB

Federal Reserve Bank of Chicago President Charles Evans said Monday Europe's debt woes could prompt the U.S. central bank to delay raising interest rates, though he downplayed the impact of the crisis so far, according to published reports.

At a conference in Seoul hosted by the Bank of Korea, Evans told reporters that he "wouldn't be surprised" if the Fed's policy of keeping rates low "gets extended just a little bit," Bloomberg News reported.

"The situation in financial markets in Europe does add uncertainty, but at the moment I look for the recovery in the U.S. to continue to improve and I don't see any changes in my outlook at the moment," Evans told reporters, according to Reuters.

"Inflation is severely under-running price stability, so it's still appropriate to keep an accommodative policy," Evans told a news conference at the Seoul event, according to Dow Jones Newswires. "But if the situation turns rapidly, policy will need to respond more quickly."

Evans reportedly also said he believes U.S. inflation of about 3% is consistent with price stability. WHAT IS HE TALKING ABOUT?!!!


The London interbank offered rate, used by banks to lend to each other in dollars, is tied to variable-rate loans in the United States and is hitting 10-month highs.

Attending the same event, Philadelphia Fed President Charles Plosser also cited European risks.

"I don't anticipate at this point that the United States in particular will see a double-dip, but obviously the financial turmoil in Europe raises some clouds on the horizon that we need to be cautious about," Plosser said, according to Reuters. THE YOU KNOW WHAT MUST BE HITTING THE FAN NEXT MONTH...

Plosser and Evans are both non-voting members of the central bank's rate-setting Federal Open Market Committee.

The Fed has said in its policy statement that conditions are likely to necessitate extraordinarily low interest rates for an extended period. Only one Fed official, Kansas City Fed President Thomas Hoenig, has dissented publicly from this policy statement

But last week Richmond Fed President Jeffrey Lacker said that he was growing less comfortable with the central bank's "extended period" language in its policy statement, suggesting that he is leaning toward wanting to raise short-term interest rates. See full story on Fed's Lacker.

"I am marginally comfortable with that language at this point," Lacker said.

Lacker does not have a vote on policy until 2012, but can participate in all discussions at the Fed's policy meetings.