Policy may need to be loosened, Fed's Evans says

A top US central bank official said on Monday that the downside risks to the economy outweighed those to the upside and that interest rate cuts might be needed.

In remarks prepared for a speech in Hong Kong, the head of the Federal Reserve Bank of Chicago, Charles Evans, said: "At the moment, the risks from the downside scenarios loom larger than those from the upside ones.

"If activity softens more than expected or if inflation and inflation expectations run too low, then policy may have to be left on hold - or perhaps even loosened - to provide the appropriate accommodation to obtain our objectives."

Evans's own forecast was for US gross domestic product to expand at a pace of between 1.75% to 2.0% in 2019, versus 3.1% in 2018.

While the lower end of that range was in-line with his own estimate for the economy's potential or long-term sustainable rate of growth "the economy won't feel like it is doing very well compared with last year’s very strong performance," he explained.

Regarding the recent flattening of the Treasury yield curve, in a question-and-answer session following his speech, according to Bloomberg, Evans said it was something to be mindful of, but the risk of a negative shock hitting the economy was not "unusually higher or lower at the moment".

Yet earlier in the day, he had reportedly said that global risks and waning fiscal stimulus Stateside meant it was a good time to be "cautious".