The chances that the $2.8 trillion stimulus measures passed by Congress since December will overheat the economy and generate higher inflation are remote, said Chicago Fed President Charles Evans on Wednesday. Inflation is likely to pick up in coming months as people resume normal activities and some bottlenecks emerge but simulations performed by economists at the Chicago Fed see inflation topping out at less than a full percentage point and dissipating in two or three years, Evans said in a speech to the Levy Economics Institute of Bard College. “We still have some ways to go before we meet our goals” of full employment and stable 2% average inflation, Evans said. As a result, Fed policy “is likely on hold for some time,” he added. Labor market conditions required to move interest rates off zero or to start to taper the $120 billion in monthly asset purchases “will not be met for a while,” he said.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.