The Federal Reserve can't sit on its hands with unemployment stuck at such high levels and should consider new "out of the box" easing steps, said Chicago Federal Reserve Bank President Charles Evans on Monday.
Even though the Fed has already taken the unprecedented step of saying that it anticipates short-term rates remaining low until mid-2013, Evans wants the Fed to go further and commit to keeping short-term rates at zero until the unemployment rate falls below 7% or the outlook for inflation over the medium term goes above 3%.
These policies should help the economy, but if progress turned out to be slow, Evans said he would consider another round or asset purchases, or quantitative easing, with the rate of purchases determined at every FOMC meeting. Evans said he understood that any inflation above the Fed's informal 2% target may be anathema to some central bank officials.
"I understand that some may find such a policy proposal to be hard to understand, or even risky. But these are not ordinary times," Evans said.
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