According to Chicago Fed President Charles Evans, the economy right now it in no better condition that what it would be if it was in a recession. Charles also goes on to suggest that the Fed needs to take more aggressive action on the jobs front.
The U.S. economic outlook has "clearly" deteriorated this year, and the continued softness of economic indicators shows that the headwinds facing the country are even stronger than thought, Chicago Federal Reserve President Charles Evans said on Wednesday.
"Conditions still aren't much different from an economy still in recession," Evans, speaking at a seminar in London said.
He said the Fed faced significant challenges in overcoming the obstacles left behind by the financial crisis.
Evans, a voting member on the Federal Open Market Committee, said he believed central banks should focus on medium- rather than short-term inflation as many short-term effects such as fluctuations in food and energy prices were beyond policy makers' reach.
Given how "truly badly" the U.S. was doing on the jobs front, the Fed should consider more aggressive action, he said.
He did not explicitly call for more quantitative easing or bond purchases but called for "strong action."
"I argue that the Fed should seriously consider actions that would add very significant amounts of policy accommodation," he said. "Such further policy accommodation does increase the risk that inflation could rise temporarily about our long-term goal of 2 percent," he said.
The Fed Open Market Committee said in August that it would continue to keep its benchmark interest rate low for at least through mid 2013, acknowledging that the recovery it had hoped for had so far failed to take shape.
The Fed ended a $600 billion Treasury bond-buying program at the end of June.
Temporary inflation above 2 percent is not something we should "regard with horror," he said.
Evans said it was "painfully obvious" that large quantities of unused resources were an enormous loss to the U.S. economy, referring to the 14 million Americans unemployed today.
Some argue there are limits to what further accommodative measures can do, he said, adding: "I'm personally much more optimistic and don't want to subscribe to that pessimistic view."
"Monetary policy should be used more aggressively to try to increase aggregate demand," Evans said.
He added he fully supported the policies implemented by the Fed, but added that more needed to be done.
"We should not be afraid of such temporarily higher inflation results today...These are not usual times," Evans said.
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