Fed members increasingly concerned about economic recovery ahead of next jobs report and September policy meeting
The Federal Reserve needs to take action now to bring down the jobless rate, a top Fed official said on Monday.
Charles Evans, president of the Chicago Federal Reserve, said the central bank should not wait for more data. “I don’t think we should be in a mode where we are waiting to see what the next few data releases bring. We are well past the threshold for additional action; we should take that action now,” he told reporters at a seminar at the Hong Kong Bankers Club.
Last week the Fed released minutes from its last meeting a the end of July which showed its members were increasingly concerned about the slowdown in the US’s fragile economic recovery. At their previous meeting in June the minutes showed only “a few members” thought further stimulus would likely be needed.
Evans said that without a change in policy, the unemployment rate, now at 8.3%, was unlikely to fall below 7% before 2015 at the earliest.
Last year the Fed launched a securities buying programme known as Operation Twist aimed at bringing down longer-term interest rates. Evans appeared to be giving support to a similar move. “It is time to take even stronger steps,” he said.
His comments come ahead of a speech Friday from Fed chairman Ben Bernanke at the Kansas City Fed’s annual gathering of policymakers in Jackson Hole, Wyoming. That speech will be closely watched in Washington as well as by the financial markets. The economy is central to the 2012 election cycle and any move by Bernanke could trigger a furious backlash from Republican critics.
After its last meeting the Fed signaled it was increasingly concerned about the apparent slowdown in the US recovery. Strong jobs growth over the winter collapsed in the spring. It has since recovered but remains historically weak compared to the job growth after previous recessions.
Next Friday the Labor Department will release non-farm payroll figures for August – the closely watched monthly survey of US employment. Last month the US added 163,000 new jobs, higher than the 100,000 gain expected by economists but not enough to bring down the unemployment rate.
The Federal Reserve Open Markets Committee, which sets Fed policy, meets after the release of those figures on September 12 and 13. That meeting is seen by economists as the last before the election at which the Fed in likely to act.