Fed’s Evans: Looking forward to time when Fed can raise rates

Chicago Federal Reserve President Charles Evans speaks at the Chicago Banking Symposium in Chicago
Chicago Federal Reserve President Charles Evans in Chicago, Illinois, United States, June 3, 2015. REUTERS/Jim Young

November 11, 2015

By Tom Polansek

CHICAGO (Reuters) – Chicago Federal Reserve Bank President Charles Evans, one of the U.S. central bank’s most dovish policymakers, said on Tuesday that he looks forward to the time when the economy is strong enough to handle a Fed rate hike.

He also suggested the Fed needs to be careful not to raise rates if it will just have to lower them again shortly afterward, a theme he has hit time and again as he as argued against the rate hike that the Fed is currently considering.

The Fed has kept rates near zero for nearly seven years since the 2007-09 financial crisis.

“I think it’s extraordinarily costly to contemplate a high probability that we’re going to revisit the zero lower bound, after a period where we’ve gotten ourselves out of this, over the next 10 years,” he said.

Evans made the comments during a discussion of U.S. government debt at the University of Chicago’s Booth School of Business, where some experts proposed that more coordination between the Fed and fiscal authorities could result in a stronger economy, especially when interest rates are pinned near zero and the Fed has little flexibility on policy actions.

“I think there are things you can do together,” Glenn Hutchins, a private equity investor who is also on the board of the New York Fed, said about the Fed and Treasury Department.

Evans indicated he saw little merit in that argument, adding that in his view monetary policy independence is crucial to effect policymaking.

“Our current system has served us well in my opinion, so the bar should be high for making major changes and risking independent decision making,” Evans said.

Seth Carpenter, the U.S. Treasury’s assistant secretary for financial markets, appeared to agree, saying that the two government agencies have different objectives and should be let to pursue them.

(Reporting by Tom Polansek, writing by Ann Saphir; editing by Leslie Adler and G Crosse)

  • gb

    If everything is as rosy as the government is telling everyone, rates should be back up around 5% right now. The Fed is in deep kaka, let alone America and our $19 trillion and growing debt. How in the world will we ever have a balanced budget ever again. Just watch for the next bubble to burst, which will be student loans, and the gov’t bailout of those, which will add another few trillion or more. That’s when things will get real ugly for those of us who don’t take on more debt then we can safely handle, and actually save money. God help us all.