Fed's Evans wary on medium-term outlook for US inflation

A top US central bank official sounded a wary note regarding the outlook for inflation, telling an audience that it might underwhelm over the medium-term.

Nevertheless, he too believed that the time to begin winding down the Federal Reserve's asset purchase programme was fast approaching.

The head of the Federal Reserve Bank of Chicago, Charles Evans, reportedly said that he was "more uneasy" about prices not rising enough in 2023 and 2024 than the opposite.

Evans made the remarks at the National Association for Business Economics's annual conference in Virginia.

In his view, policymakers needed to allow inflation to run "reasonably" above 2% during the expansionary phase of an economic cycle if they wanted to anchor inflation expectations at 2.0% and offset the underruns that will inevitably happen when the economy shrinks.

Yet he too now believed that the economy was on the cusp of meeting the threshold of "substantial further progress" needed to start tapering the Fed's quantitative easing.

The necessary condition for that, he added, was continued improvement in the unemployment picture.

Evans also revealed that he had brought forward his forecast for a first interest rate increase from 2024 to late 2023.