The Federal Reserve should keep interest rates near zero until unemployment falls below 7%, Charles Evans, president of the Federal Reserve Bank of Chicago said Monday. The Fed Bank president also argued for another round of mortgage-backed securities purchases.
He made those assertions at Market News International in Hong Kong, arguing that keeping rates low until unemployment reaches normal levels would give the markets more confidence.
Evans suggests the additional MBS purchases could be open-ended, lasting until the nation sees three to four quarters of falling unemployment.
"Based on the work I have seen, I do not expect that such policy would lead to a major problem with inflation," Evans said in his statements. "But I recognize that there is a chance that the models and other analysis supporting this approach could be wrong. Accordingly, I believe that the commitment to low rates should be dropped if the outlook for inflation over the medium term rises above 3%."
Click here to read his full speech.