Evans says joblessness still too high, dollar may damp inflation

WASHINGTON – U.S. unemployment remains too high and a stronger dollar could hurt the country’s exports while preventing inflation from rising to the Federal Reserve’s goal, Chicago Fed President Charles Evans said today.

“We still aren’t back to full labor-market health,” Evans said in remarks prepared for delivery in a speech in Plymouth, Wisconsin. “At 5.9 percent, the unemployment rate remains above what most people think of as its long-run neutral level.”

Evans’s comments were his first in public since data released on Oct. 3 showed that unemployment unexpectedly fell to 5.9 percent in September from 6.1 percent the month before.

The long-run neutral rate of unemployment refers to the lowest sustainable jobless rate seen as consistent with stable prices. Fed policy makers estimate it lies between 5.2 and 5.5 percent, according to projections released on Sept. 17 that exclude their three highest and three lowest forecasts.

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The Fed on Sept. 17 retained a pledge to hold interest rates near zero for a “considerable time” after halting a bond-buying campaign after its next meeting on Oct. 28-29.

Evans, a voting member of the policy-setting Federal Open Market Committee next year, repeated that officials should be “exceptionally patient” before they start to raise rates and said a stronger dollar could sap growth.

“Weakness abroad could translate into a higher exchange value for the dollar against other currencies, further reducing net exports,” he said. “A higher dollar also would result in lower prices for imports, which, in turn would hold down inflation and delay progress toward our 2 percent inflation target.”

The Bloomberg Dollar Spot Index, which measures the U.S. currency against 10 major rivals, has risen more than 4 percent since the start of the year.

Evans has previously said that he favors holding rates near zero until the first quarter of 2016.

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