US monetary policy less expansionary than it might seem, Fed's Evans says

The US central bank might be less able to meet its inflation target if it chooses to address financial stability concerns, the president of the Federal Reserve bank of Chicago said.

In remarks prepared for a speech, Charles Evans argued that monetary policy in the States was less expansionary than what the result of simple policy rules might suggest (or other historical comparisons you might read about in the press).

"And this, in turn, means that the risk of overshooting our 2 percent inflation objective is lower — and the likelihood that we actually get to 2 percent is smaller — than what these comparisons would imply.

"To conclude, I feel we will likely be in a low interest rate environment for some time, which leaves monetary policymakers with less room to navigate future downside shocks should they occur. This is one reason that monetary policy is expected to normalize at a very gradual pace. And even once it has normalized, the new equilibrium likely will be one with lower interest rates than we have experienced in the past."