Federal Reserve Bank of Chicago President Charles Evans, who has been among the Fed’s most vocal proponents of record stimulus, said more signs of strength in the economy are needed to reduce asset purchases.
“I can’t have tremendous confidence in our economic situation,” he said to reporters today in Oslo. “A lot of developments are still under way. At the moment the data doesn’t provide us with confidence to make major adjustments” to the purchasing program, he said.
Evans, a voter on policy this year, said today that he wouldn’t “be surprised” if purchases were kept in place in October, and could remain at the same pace into January.
The U.S. central bank surprised financial markets last week by refraining from tapering $85 billion in monthly bond buying, saying it’s waiting for more signs of sustained economic gains. Evans was an early supporter of the current round of quantitative easing started last September.
Most economists surveyed by Bloomberg on Sept. 18-19, after the Fed policy meeting, expect the central bank to wait until a gathering in December to reduce monthly bond buying. The program isn’t on a “preset” course, and the volume of future buying depends on changes in economic data, the Federal Open Market Committee said in a Sept. 18 statement.
A recent tightening of financial conditions, if sustained, could damp growth, the FOMC said. The yield on the 10-year Treasury note rose to as high as 2.99 percent on Sept. 5.
The decision to maintain current policy, backed by Evans in the FOMC vote, pushed up stocks to record highs and triggered a rally in Treasuries.
Kansas City Fed President Esther George, the only policy maker to dissent last week, said the central bank is risking its credibility by not reducing bond buying when it has primed the markets for such a move.
Evans was the first policy maker to propose that the Fed pledge to keep interest rates near zero until at least certain economic benchmarks are met, an approach adopted by the FOMC in December.
U.S. central bankers last week reiterated a pledge to hold down the main interest rate as long as joblessness is above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent. The unemployment rate was at 7.3 percent in August.