Fed’s Evans Says Low Inflation Is A Bit of a Puzzle from WSJ

ByMark Peters andMichael S. Derby

LAKE FOREST, Ill.–Federal Reserve Bank of Chicago President Charles Evans said Wednesday that low inflation remains a bit of a puzzle as the economy shows momentum.
Mr. Evans, whose remarks came during a question-and-answer session here, described the economy as doing better and showing momentum. But he said that isn’t enough to merit a rate increase until 2016 because of low inflation, which has fallen short of the central bank’s 2% price target for nearly three years.
The central banker said low inflation isn’t just an issue here, but one that is being seen around the world. He added that U.S. inflation could become decoupled from other nations.
Mr. Evans, who is a voting member of the monetary policy-setting Federal Open Market Committee, believes the Fed won’t get to that 2% price target until sometime in 2018, which would indicate the central bank could raise rates at some point in the first half of 2016.
The Federal Reserve has been moving toward an interest-rate increase as unemployment falls and the economy shows signs of further strength. Federal Reserve Chairwoman Janet Yellen last week laid the groundwork for an interest-rate increase later this year and other central bankers have since echoed her message. The central bank has held its benchmark rate near zero for more than six years in an effort to boost the economy.
Mr. Evans described proposals to audit the Fed as misguided, saying the central bank is transparent.