Fed's Evans sees 'aggregate demand trouble brewing' without extension of fiscal supports

Reuters reports that Chicago Federal Reserve Bank President Charles Evans on Monday called forcefully for more US government spending to support the economy, saying it is up to lawmakers and the White House to put the job market back on track toward health.

Evans sees the US jobless rate at 9.5% at the end of 2020, 6.5% at the end of 2021 in baseline outlook.

• More pessimistic forecasts are 'equally' likely.
• Monetary policy is about where it can be.
• Ball is in Congress' court on economy.
• Sees 'aggregate demand trouble brewing' without extension of fiscal supports like jobless benefits.

"Aggregate demand trouble is brewing with the expiration of these relief policies," including supplemental jobless benefits and a national moratorium on evictions that ended last month, Evans told reporters on a call. "The punch line ought to be, 'the ball is in Congress’ court.' Fiscal policy is really fundamental for getting us going forward."

"If we go very long without somehow addressing the reduction and evaporation of that support, I think it’s going to show up in lower aggregate demand, and that would be very costly for the economy, individuals, households, people," Evans said.

Evans argues that easing monetary policy further would really only be effective once the path of the virus is clearer and the economy looks further on the way to full employment, perhaps by the spring of 2021.

"Monetary policy is about where it can be," he said. "At the moment, it’s really fiscal policy that needs to be addressing this."