Inflation too low globally, Fed´s Evans says

The outlook for inflation in the States was still quite uncertain and the inflation globally too low, a top Fed official said.

In a presentation prepared for a speech to be delivered at the University Club, in Chicago, regional Fed president Charles Evans said that lower real equilibrium interest rates meant that there was less headroom to increase rates.

Nonetheless, the emphasis was rather on low inflation, with over half of the presentation materials dedicated to the existing downside risks for the general price level in the economy.

Evans, who was set to have a vote on the Federal Open Market Committee in 2017, recommended that the Fed adopt a "symmetric" inflation target.

There was a need to "demonstrate commitment to achieving the inflation target sustainably, symmetrically, and sooner rather than later", he was expected to say in his presentation.

Financial market and survey indicators of inflation expectations were at very low levels, there was a low inflation psychology among many contacts, global disinflationary forces were present and inflation is below target in all major advanced economies, the presentation read.

All of the above led him to the conclusion that, "[it] might require [...] undershooting the unemployment rate, overshooting the inflation target."

“I suppose I’ve got, hard to say, three [interest-rate hikes] priced in by the end of next year,” he reportedly told reporters after his speech.

As of 2001 BST the yield on the benchmark 10-year US Treasury note was three basis points higher at 1.76% and that on the policy-sensitive two-year note up by one basis point to 0.84%.