Chicago Fed Chief Say Bank Must Act On The Economy

Chicago Fed chief Charles Evans says the Federal Reserve must act now to curtail a rapidly deteriorating US economy.

In a speech he said

Central bankers must formulate monetary policy with the understanding that our knowledge is imperfect. We may have incomplete and sometimes competing views of the forces that generate current economic conditions. This is especially true in the difficult circumstances we face today. In my view, we should try to formulate a monetary policy strategy that carefully balances the risks associated with the reasonable alternative economic scenarios that we face and is as robust as possible to miscalculations as to which of these scenarios is predominantly true.

He fears that the major risk is on the downside which means that he is in the camp of those Fed members who think that monetary stimulus is necessary to create a safety net under the economy.’

The battle among Fed members is whether the bank should begin another round of bond purchase–which is called QE3 in the press.