Chicago Fed President Charles Evans said he expects to see a substantial downturn in the U.S. economy well into 2009.
Evans noted that recent incoming economic data has come in weaker than expected since the FOMC forecast was assembled. He said he expects the economy to remain sluggish for much of 2009 with a recovery taking root in 2010-2011.
Evans mentioned that Fed forecasts are implying a "noticeable decline" in real GDP for the second half of 2008. He expects the slack in the economy to continue given the recent high jobless rate.
On the inflation front, Evans forecasts it will continue to decline as commodity prices fall lower. He predicted the PCE price index will come in at 1.4%-1.7% and that he expects it to remain "consistent with price stability."
Evans said it will be a while before markets begin to work in a smooth and efficient manner, and added that it's important for policy-makers to work together to restore stability in markets.
By Steve Stecyk and edited by Stephen Huebl
©CEP News Ltd. 2008