Charles Evans, President of the Chicago Federal Reserve, recently spoke at The Darla Moore School of Business giving “A Perspective on the Current Economy.” The press summarized the lecture by indicating Evans remains a “dove” on inflation:
“The Fed is more sanguine about inflation than some because an outbreak of higher prices is missing a key ingredient – higher wages, Evans said…A weak labor market will continue to exert important downward influences on inflationary pressures, he said.” (from Marketwatch)
A cynical person could say that Evans does not fear inflation because QE2 has failed to provide the one single thing that Americans care most about in the economy right now: jobs. Instead, I will note that this commentary comes immediately on the heels of an op-ed piece from Laurence H. Meyer, a former governor of the Federal Reserve, who opined that inflation is not a problem…and even if it became one, the Fed would quickly get it back under control. Since the Federal Reserve cares more about inflation expectations than current levels of inflation, it makes a lot of sense that a good amount of energy is spent trying to convince people that no matter what the data say or the anecdotal evidence (or Inflation Watch postings for that matter!), the future is fine.
However, the Wall Street Journal noted that the commentary from Evans runs directly counter to the warnings of coming inflationary pressures from FOMC voting member Charles Plosser, president of the Philadelphia Federal Reserve Bank (see here). Apparently, the gameplan and script are not receiving the same reading on the team!