US monetary policy to be accommodative for long time: Fed official

Washington, Jan 5 The US monetary policy will be accommodative for a long time as the economy slowly recovers from the still raging coronavirus pandemic, a senior Federal Reserve official said.

"The bottom line is that it will take a long time for average inflation to reach 2 per cent. To meet our objectives and manage risks, the Fed's policy stance will have to be accommodative for quite a while," Federal Reserve Bank of Chicago President Charles Evans said while addressing an event on Monday.

"Economic agents should be prepared for a period of very low interest rates and an expansion of our balance sheet as we work to achieve both our dual mandate objectives," he said.

Evans added the Fed will likely continue its current asset purchase program for a while as well, Xinhua news agency reported.

He also said the Fed should aim to boost inflation to 2.5 per cent if the central bank wants to get average inflation up to 2 per cent.

"If we try to fine-tune a very modest inflation overshoot of only a 10th or two, we run a very large risk of failing to achieve our 2 percent averaging goal within any reasonable amount of time," he said.

The Fed last month decided to keep its benchmark interest rate unchanged at the record-low level of near zero while expecting rates to stay there at least through 2023.

The American central bank also pledged to continue its asset purchase program at least at the current pace of $120 billion per month until it sees "substantial further progress" in employment and inflation.

( With inputs from IANS )