— Asset Sales Later Rather Than Sooner During Eventual Exit Process
— European Situation to Dampen U.S. Exports, Recovery ‘A Little Bit’

SEOUL (MNI) – The Federal Reserve can maintain its effort to
stimulate the U.S. economy and support the banking system through its
“large” balance sheet for an extended period, a period that may be
extended even more should the situation worsen, Chicago Federal Reserve
President Charles Evans said Monday.

“I still see we can maintain the balance sheet for an extended
period and with uncertainty in financial markets I wouldn’t be surprised
if that was extended a bit more,” he said at a conference here sponsored
by the Bank of Korea. “It is contingent on the state of the economy.”

“Accommodative monetary policy continues to be appropriate for an
extended period of time,” he said.

Evans said the situation in Europe is “a small additional
uncertainty” that will mean U.S. exports will be weaker than expected.

“That’s going to dampen the recovery a little bit,” he said.

When the time does come to tighten, the Fed has “many ways to go
for more restrictive policies.”

The Fed has “a wide array of tools” at its disposal, but Evans said
he would expect it would first move to sterilize excess reserves. “Asset
sales will come later but it will depend on circumstances and the
perceived effectiveness of those tools.”

Evans said the U.S. has definitely turned a corner and the economic
recovery “seems well underway” although the employment situation remains
“troubling.”

He said most recent employment numbers have been “reasonably
strong” and pointed out that the most recent rise in the unemployment
rate was due to more people coming into the labor force.

“Inflation in the U.S. is under-running what I would term price
stability,” he said.

“I would look for the recovery in the U.S. to continue to improve,”
he said, adding that “the fact that it is improving continuously is a
very good sign.”

“The labor market situation will improve” and “the consumer seems
to be doing slightly better,” he said, even though the overall
circumstances remain challenging.

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