Fed's Evans: Natural Jobless Rate in US May Be Lower Than 5%

        By Todd Buell
        MUNICH--Chicago Fed President Charles Evans said Wednesday that it was by no means certain that the natural rate of unemployment in the U.S. is 5% and that it might be even be lower, suggesting that it might take even longer for inflation to get back up to the Fed's 2% target.
        "I've got the natural rate of unemployment at 5%, [but] my research staff has indicated it could be lower than that," he said.
        "There's a lot of uncertainty about that. As unemployment goes down, I'm also going to be looking to see what inflation is doing. Because if we've got a natural rate below 5%, we might not see inflation pick up until we go even further. That's a complicated one."
        The dovish central banker, who has repeatedly advocated that the Fed wait until next year to raise rates, said, however, that he had an "open mind" about determining appropriate policy and could be convinced to change his mind if data surprised positively.
        "I will listen to other viewpoints, depending on where we are and the data we've seen. I could be convinced to agree to something earlier than that. I think the data would have to look different than they currently are expected to look, but I'm going to go in with an open mind."
        He also told reporters that for him rises in nominal wage growth and core inflation were key indicators about the future path of inflation.
        "I think substantially stronger sustained nominal wage growth would be a very important harbinger of rising inflation pressures, improvements in the economy," but he said, "that's not my number one expectation." Still "if we saw that, that would be very big," he said.
        Mr. Evans said that he didn't see inflation "sustainably" moving above 2% until 2018.
        Mr. Evans also told the audience at a conference here that the Fed's 2% inflation target was symmetric and therefore it wasn't a problem if inflation exceeded that line sometimes.
        "I think that 2% is a very workable and manageable inflation target...under the terms that we've laid out. It's a symmetric objective, so you don't fear the fact that you should be spending perhaps 50% of the time above 2%."
        Write to Todd Buell at todd.buell@wsj.com
        (END) Dow Jones Newswires

        May 20, 2015 05:04 ET (09:04 GMT)

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