There were few fireworks in the latest Federal Reserve meeting. After a Federal Open Market Committee meeting in Washington on Monday and Tuesday, the central bank left open the possibility of taking further steps to try to boost the sluggish economy … but gave no hint as to what those moves might be.
That’s not much of a surprise — as stated yesterday, it is painfully clear that the Federal Reserve and Chairman Ben Bernanke are powerless.
But it’s worth noting that amid all this, one stubborn member of the central bank — Charlie Evans, president of the Chicago Fed — continues to make a fuss.
Fed policymakers did their normal cheerleading about the economy, voting to leave policies unchanged for the time being. The vote was 9-1, with Evans as the lone dissenter. And as usual, his complaint was that he wanted to take stronger action to right the economy.
According to the official Fed statement, all we know is that “Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.” But Evans has gone on the record numerous times in the past few months as supporting even more “dovish” policy at the Federal Reserve as a nod to systemic unemployment problems — even if that means perhaps facing brisk inflation.
For instance, in September we learned Evans supported holding rates at near zero until the jobless rate falls to 7%, as long as inflation doesn’t threaten to top 3%. That could be a heck of a long time.
In that same September meeting where Operation Twist was announced, there were three dissenters — however, Evans was the only one pushing for the Fed to do more. Two others — Minneapolis Federal Reserve president Narayana Kocherlakota and Dallas Federal Reserve president Richard W. Fisher — actually wanted a more hawkish approach.
In a speech soon after, Fisher summed up his reasoning pretty concisely: “(T)he committee’s policy has yet to show evidence of working and nobody seems to quite understand why.” As such, he was reluctant to allow the Fed to continue pulling out all the stops and trying increasingly strange and unusual tactics to stimulate the economy.
Fisher and Kocherlakota apparently had no complaints this time around, as the Fed sat on its hands. But Charlie Evans continues to beat the drum for more action.
So the question remains: Who is right? Is Evans off base with his push for more action even though the Federal Reserve has been decidedly ineffective thus far? Or is the economy’s continued troubles a sign that we need to be even more aggressive if we want to move the needle and prevent the dreaded double-dip recession that so many fear is lurking around the corner?
Republicans who recently penned a blunt letter threatening the Fed from taking more action undoubtedly think the Chicago Fed president is part of the problem — and Evans assuredly is set up to be a lightning rod for criticism of the central bank. But if the economy backslides, Charlie Evans might wind up being vindicated for his warnings that the Federal Reserve did not do enough to help America in its time of need.