Fed’s Evans Is Open-Minded on Rate Cut Despite Weak Industry

(Bloomberg) --

Chicago Federal Reserve chief Charles Evans said the recent weakness in manufacturing hasn’t yet convinced him to cut interest rates again given many of the U.S. economy’s fundamentals are solid.

Markets have increased bets on a quarter-point rate reduction at the Fed’s Oct. 29-30 meeting after disappointing figures this week. The U.S. ISM factory index dropped to a decade-low and job growth came in below expectations.

Yet in a Bloomberg Television interview on Thursday, Evans said U.S. consumer spending and the labor market remained strong and that “I’m open minded about the decision.”

“Whether one more rate cut at this point is the right decision or not, I think we’re just going to have to go into the meeting and see,” he said. “The question is how accommodative we need to be. At the moment it’s still risk management.”

One of the next big data points comes Friday, when the Labor Department will release payrolls for September. The report, which could be key to the Fed in evaluating the outlook, is expected to show a 148,000 increase, compared with 130,000 in August.

There’s a “pretty good growth outlook,” Evans said. “The question is whether or not we’re going to be able to navigate the uncertainties and some of the shocks that come our way and get that growth path.”

To watch the full 12-minute interview with Evans, click here.

Evans, a dove who backed rate cuts in July and September, said he was worried about the inflation outlook and would like to push the rate above the 2% target for a while to balance the long period of undershooting.

That way, “you’d be more assured you’d get to 2 if you found headwinds.”

--With assistance from Jeannette Neumann.

To contact the reporters on this story: Fergal O'Brien in Zurich at fobrien@bloomberg.net;Guy Johnson in London at gjohnson87@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Catherine Bosley

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