By Shayndi Raice
CHICAGO -- Lower U.S. interest rates are needed to combat weak inflation, Federal Reserve Bank of Chicago President Charles Evans said Friday.
Mr. Evans, a voting member of the Fed's rate-setting committee, said he expects to see two reductions in the central bank's benchmark federal-funds rate this year to lift inflation above its 2% target. He said the timing of the cuts was less important than discussing the need for them and setting inflation expectations.
"Because inflation expectations seem to be below our 2% objective and it's been stubborn...it tells me our current setting for policy is on the restrictive side," he told reporters after speaking at a conference.
The Fed seeks to keep inflation at 2% because it views that level as consistent with a healthy economy. Central bankers worry that if inflation continues to run below 2%, consumers and businesses will expect it to stay low, holding down price pressures.
Fed Chairman Jerome Powell strongly signaled this week that the central bank is ready to cut rates at its coming policy meeting on July 30-31 to bolster the U.S. economy against risks from slowing global growth and uncertainty from trade tensions.
The Fed has held its benchmark rate in a range between 2.25% and 2.5% since December.
Mr. Evans said he would like to see inflation rise above the 2% target to reinforce a symmetric view of the target, where inflation sometimes is above and sometimes below that goal.
U.S. inflation has been running below 2% this year. Mr. Evans said he expects inflation to reach 2.2% in 2021 with the rate cuts.
He also said a slowdown in foreign economic growth, trade disputes and unresolved fiscal issues are also weighing on the U.S. economy, requiring lower interest rates.
Write to Shayndi Raice at firstname.lastname@example.org