Charles Evans, Chicago Fed Pres:.. There is an argument if I think it takes 50 basis points before end of the year to get inflation up and something right away would make that happen sooner... that's why I could be comfortable with [cutting Fed Funds rate by a half point in two weeks]
Jeff Berkowitz: President Evans, Why not cut at the end of July Federal Reserve meeting-- cut 50 basis points [from the current targeted Fed Funds targeted rate]? I guess that would make the targeted rate range from 1.50 % to 1.75 %]. Because based on what you just said, the risk from inflation, or of more inflation is very low and the economy might need a jolt, so the risk reward ratio seems low risk, high reward- as opposed to being more hesitant with a quarter [per cent interest rate] cut, not fifty basis points.
Charles Evans, President of the Chicago Fed: Yeah, I think it's going to depend on the strategy. And, based upon the way in which I laid this out, you're right, there is an argument that if I think it takes 50 basis points before the end of the year to get inflation up and something right away would make that happen sooner, I am not worried about inflation taking off, unexpectedly. Normally, when you kind of stretch things out a little bit, it's the risk management- you want to still be looking at the data- I think the inflation issue is likely to still be there. Again, if inflation just all of a sudden got up there to 2 per cent, this is the point where I think we need to demonstrate symmetry, so I am really looking for inflation to go above 2 percent, like to 2 and a quarter. So, that's why I could be comfortable with that.
Charles Evans, President of the Chicago Fed (Cont,): Now for those who are thinking this is more risk management because let's remember the economy is doing well, fundamentals are good. And, a lot of what makes me nervous about the economy are things that I am not quite sure how it is going to play out. Foreign economies are a little weaker, maybe they are going to find a little more solid footing. I think the German manufacturing data most recently was a little bit better. But, I think there are some difficult issues, especially trade- the way that it is affecting things. But, you know, risk management- we're a strong domestic economy facing some uncertainities, so you could easily argue go a little bit slower, if you were going to go that way at all.
Charles Evans, President of the Chicago Fed at a presser after speaking on "Labor Markets, the Economy and the Fed," as a part of CNBC's @Work, Human Capital + Finance program at KIMPTON GRAY in Chicago Loop on July 16, 2019. Presser was at 2:10 to 2:35 pm.