CHICAGO (Reuters) - Chicago Federal Reserve president Charles Evans said on Wednesday he backed the Fed’s two recent rate cuts but feels the central bank is now “well-positioned” to see how economic data evolves.
“A couple of rate cuts seemed useful,” to further the Fed’s 2 percent inflation goal and guard against risks of a slowdown, Evans said. Markets are betting the Fed will cut rates more this year, but after cutting rates twice this year officials have been reluctant to commit to further reductions.
In comments to a suburban Rotary Club here, Evans delivered an optimistic view of the U.S. economy, with growth still slightly above trend, and a strong outlook for consumers who are benefiting from low unemployment and wage gains that are solid but not “outrageously” so.
That could go on “indefinitely,” Evans said, adding that while the Fed needs to be “on guard” it did not need to take any more action against risks that have not materialized.
When they cut rates last week for the second time this year, Fed officials also issued new projections showing them divided into three roughly equal groups - one expecting another rate reduction this year, one expecting no change, and one expecting the Fed may need to raise rates by the end of the year.
Evans said that his current forecast is that, factoring in the two rate cuts already approved, the Fed will have successfully “navigated” the impact of trade wars and other troubles, with growth continuing and inflation rising slightly above the Fed’s 2 percent target over time.
“I think we are in a good place in terms of the rate setting,” Evans said. “We have adjusted in a much more accommodative fashion.”
“I am open minded to additional action if the data comes in that way and that is how the discussion goes...But at the moment we are well positioned.”
Reporting by Howard Schneider; Editing by Chizu Nomiyama