2% Inflation? Maybe in Three Years or So According to Fed President

Inflation is an interesting thing. We talk about rising prices as if they gently fall on everyone equally when we know that’s not the case. If you drive a lot, then falling fuel prices have been your friend. But if you like to eat, then rising food prices have been a problem. Over the last several years home rental prices have marched higher, eating up more of the budgets of newly-minted adults.

But to one group, members of the Federal Reserve, inflation is something to be loved because it encourages people to spend money instead of leaving it in the bank, or at least that’s the theory. Unfortunately for them, they don’t see overall inflation reaching their 2% target anytime soon, which means higher interest rates are even further away.

Chicago Federal Reserve President Charles Evans said the Fed’s 2% target is probably several years away, say at least 2023, and that he doesn’t expect the central bank to raise rates before 2024. 

On a video call with reporters he said about inflation:

“…it’s just a slow slog beyond that – I’ve got an overshoot in the out years, but that’s premised on continued accommodation and better fiscal policy as well.”

His comments were directed at two groups, investors and politicians. Evans wants investors to expect low rates for years, encouraging them to borrow money to invest and to buy risky assets such as stocks and lower-rated bonds. As for politicians, he wants them to get off the dime and pass a new relief package that sends free cash to consumers and businesses. His not-so-veiled comments imply that if there is no “better” fiscal policy, meaning free money, then the economy won’t recover.

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