A Bit Of Optimism

Chicago Fed president Richard Evans offers some good news on what is an otherwise dismal day in the financial markets.

Mr. Evans told the Chicago Tribune editorial board he believes the U.S. economy could grow more rapidly in 2010 than current consensus forecasts. The expected growth rate of 3.5% or so in GDP would be "an unbelievably modest growth rate on the heels of the contraction we just had." He notes that in the past, the economy has bounced back much more rapidly after big declines. He believes a growth rate of 4% for 2010 GDP is "not outside the realm of possibility."

Even as such a growth rate, the economy would not suffer from inflation. Given stagnant wages and 10% unemployment, Mr. Evans does not see inflation as an immediate threat. The only element he sees that could spark inflation would be a deficit catastrophe.

This outlook supports the Fed's accomodative monetary policy and he adds, "There's going to be no strong urgency to recalibrate monetary policy."