Fed’s Evans signals support for inflation rising to 2.5% By Reuters

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(Reuters) – Chicago Federal Reserve President Charles Evans on Thursday signaled support for promising to keep interest rates pinned near zero until inflation reaches 2.5%, well above current low levels and modestly above the U.S. central bank’s target of 2% inflation.

“I’d be comfortable with inflation going up to 2.5% as long as we were trying to average off very low inflation rates,” Evans told reporters on a call. Evans was the architect of an approach the Fed adopted in 2012 in which it vowed not to raise rates until unemployment fell below 6.5% as long as inflation was projected to rise to no more than 2.5%.

“I think the way that we did it in 2012 is not unattractive, (but) our environment is somewhat different now because we are saying we want to average 2%,” Evans said.

Fed policymakers are also in complete agreement that the Fed should not raise rates preemptively as unemployment falls “unless you see inflation,” he said.

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