“That’s good for the consumer,” he added, “but it’s going to find its way into a lower price level, and we’d need more accommodation to get inflation up to 2 percent.”
Economists at the Fed believe 2 percent is a healthy level of inflation. While low levels of inflation indeed can benefit consumers through lower prices, they also can threaten economic growth, limit earnings and discourage spending.
Evans’ remarks come just a few days after Amazon announced a blockbuster deal to buy Whole Foods, the online marketplace’s biggest excursion into the brick-and-mortar retail space. Analysts and economists believe one of Amazon’s first priorities will be to lower prices at the upscale grocer, a move that would lead to industry-wide pressures and overall lower inflation.
Evans did not mention the deal during the interview. However, he did discuss some of the broader issues affecting inflation and what impact they have on Fed policy.
“For every company that sees the value of their capital go up, there’s another company that has been disrupted and the value of their capital gets marked down because it’s not going to compete in the same way,” he said.
Evans believes the Fed has a window of time to watch the data before hiking again.
“We can go until December and make a judgment,” he said. “I think we have to look at the data and see how things improve.”
Traders in the fed funds futures market believe there’s a 50 percent chance the FOMC will increase rates once more this year. Observers generally believe the Fed will begin unwinding its $4.5 trillion balance sheet — the portfolio of fixed income it has accrued in its economic stimulus programs — in September.
Watch: Evans says 3 percent economic growth is possible in the short-term, but more needs to be done to sustain that level.