Evans: Fed’s credibility at risk, if inflation fails to reach the target

Charles Evans, President of the Federal Reserve Bank of Chicago, said today that the US central bank needs to bring inflation up in order to avoid the lose of credibility, making it harder for the Fed to reach its targets. 

He mentioned that the Fed must leave rates at low levels and even accept a level of unemployment below the target, to take inflation to 2%. According to him, that level of inflation is healthy and desirable for the US economy.  That level of inflation would be reached over the next three years said Evans and warned about downside risks to his outlook, that includes a further appreciation of the US Dollar. 

Evans, a voting FOMC member this year, supported gradual rate hikes and signaled that there is no rush to discuss Fed’s balance sheet.