The Deflation Battle: Fed Official Issues Call for Aggressive Action --- Chicago President Evans Proposes Raising Inflation Target Above 2% in Effort to Revive the Economy
CHICAGO -- Charles Evans, president of the Federal Reserve Bank of Chicago, called for the Fed to do more to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly a declaration that it wants inflation to rise for a time beyond its informal 2% target.</br></br>"In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should," Mr. Evans said Monday in an interview with The Wall Street Journal. "This is a far grimmer forecast than we ought to have," he added. As result, he said, he favors "much more [monetary] accommodation than we've put in place."</br></br>The comments are significant because Mr. Evans tends to reflect the broad center of gravity at the central bank. His prescription for aggressive action, though not uniformly held by his colleagues, suggests a shift in the mood at the Fed.</br></br>On the heels of remarks by Fed Chairman Ben Bernanke and New York Federal Reserve Bank President William Dudley, it is likely to reinforce a growing conviction among investors that the Fed will restart a bond-buying program when it meets Nov. 2 and 3.</br></br>It also suggests Fed deliberations are going beyond resuming bond-buying plans to contemplating new strategies for inflation and for communicating the Fed's stance to the public.