CHICAGO (Reuters) - The U.S. Federal Reserve could cut interest rates again as it would provide a little bit more insurance for the U.S. economy against potential headwinds and boost inflation, Chicago Fed President Charles Evans said on Tuesday.
“I think another rate cut would help for generating more inflation. It would help for a little more insurance. Is it necessary and essential? I’m not sure. But I’m certainly open minded to those arguments,” Evans told reporters following an event in Chicago, in which he also said he was still optimistic about the U.S. economic outlook.
Last week Evans said he would go into the Fed’s next policy meeting on Oct. 29-30 “extremely open-minded” to making further adjustments to monetary policy in either direction.
On Wednesday, Evans added he “wouldn’t mind another cut. I could see it either way.”
Evans has supported the central bank’s decision to lower borrowing costs this year. The Fed cut interest rates in July and at its subsequent September meeting to offset the impact to the U.S. economy from slowing global growth and the Trump administration’s trade war with China, which has hurt U.S. manufacturing and cooled business investment.
The benchmark overnight lending rate is currently in a target range between 1.75% and 2.0%.
Evans said downside risks to the economy were stronger than the upside risks but that overall the United States has been reasonably well positioned with current monetary policy.
Asked about the announcement by Fed Chair Jerome Powell earlier on Wednesday that the central bank is poised to expand its balance sheet, Evans said policymakers had to make a call about the size of reserves the central bank should keep.
“We have to make a judgment about the size of reserves, what ample reserves really means in this environment and what the appropriate size of this is,” he said. “It’s very easy to say organic growth in the balance sheet. It’s a little less clear to say exactly what that is.”
Reporting by Karen Pierog; writing by Lindsay Dunsmuir; Editing by Cynthia Osterman