MercoPress. South Atlantic News Agency

US Fed Reserve in no hurry to raise benchmark interest rates

Charles Evans described May jobs report ‘disappointing’

United States Federal Reserve Bank of Chicago President Charles Evans reiterated on Tuesday that now is not the right time for the US central bank to raise benchmark interest rates. He also said the US unemployment rate will decline slowly after the “disappointing” May jobs report.

“Currently, policy is, appropriately, very accommodative” Evans said in a speech Tuesday in Chicago. “But, eventually, we will have to return to a more normal stance.” Consumer spending will show “relatively modest growth” and inflation “will remain relatively stable,” he said.

The May job-market “data were disappointing, but they are only one month’s numbers,” Evans said at a breakfast forum hosted by the University Club of Chicago. At the same time, “I anticipate that the rate and length of unemployment will improve relatively slowly,” he said.

Responding to audience questions after the speech, Evans said that given the outlook for unemployment and inflation, “I think that we’re going to have an accommodative policy stance for quite some time.”

“At the moment I don’t see any hurry” to change that and raise interest rates, Evans said. He told reporters that the US economy is growing yet not at a “really strong rate.”

While the European debt crisis will probably have “limited” effects on US trade, officials must watch financial markets “carefully” for signs of rising interest rates on “riskier” assets, Evans said in the speech.

On Monday Fed Chairman Ben S. Bernanke said the US recovery probably won’t quickly bring down the unemployment rate, which is likely to stay “high for a while.” Given the depth of the recession, the recovery is “moderate-paced” Bernanke said during a question-and-answer session with ABC News.

Private payrolls rose by 41,000, trailing the 180,000 gain forecast by economists, while the jobless rate fell to 9.7% from 9.9%, the US Labor Department reported June 4. Including government workers, employment rose by 431,000, boosted by a jump in hiring of temporary census workers.

“Businesses are being cautious about adding permanent staffing,” Evans said. “But they can increase output for only so long without adding to payrolls. As the recovery progresses and businesses become more confident in the future, employment will increase on a more consistently solid basis”.

At the FOMC meeting on April 27-28, policy makers raised their US growth estimates for 2010 and lowered forecasts for unemployment and inflation. Officials said the economy will expand in a range of 3.2% to 3.7% this year, and the jobless rate will average 9.1% to 9.5% in the fourth quarter.