WASHINGTON — Chicago Federal Reserve Bank President Charles Evans Monday said it will be "difficult to feel confident" Congress and the president can avoid a repeat in January of the just-resolved fiscal fight, making a December taper decision "pretty tough."
"It's very difficult to feel confident in December given that we're going to repeat at least part of what just took place in Washington," he said in an interview with CNBC. "So December will be pretty tough, and we could in fact get more restrictiveness."
In comments last week, Evans said there were not enough positives in U.S. data for the Federal Open Market Committee to pullback on the $85 billion of Treasuries and mortgage-backed securities it purchases each month.
In Monday's interview, he reiterated: "Given that in September, we thought it was much too close to call, we needed to see evidence of more sustainability of improvements in the labor market and we haven't had a lot of data since that meeting because they stopped publishing data during the government shutdown, October's a tough one."
And, he added, "I think we need a couple of good labor reports and evidence of increasing growth, GDP growth, and it's probably going to take a few months to sort that one out."
The data backlog from the government shutdown will start to trickle out this week, with the September labor report, originally scheduled for Oct. 4, released Tuesday.
"I think the labor report is very important," Evans said. "We need to see numbers getting up to 200,000. That's very important."
But while the Fed needs to see the unemployment rate "continue to improve," what is really needed is an improvement "because more people are actually turning up to look for work" and not other reasons, such as a labor force participation rate.
He also is closely watching consumer spending, he said. "One thing that has been very discouraging has been, outside of durables, consumption growth has been weaker," he said. "And that is sometimes a harbinger of households thinking that things aren't nearly as good as they ought to be."
Asked what limits the Fed's balance sheet, Evans said he does not think of it that way. "I think the Fed needs to do whatever is necessary to help meet our dual mandate objectives."
Evans said he does not see financial stability risks at the moment, nor evidence of asset bubbles.
"We're constantly looking at whether our policies or any other events are causing risks of financial instability," he said. "I think the run up in the stock market is explainable by the fact that corporations have been doing pretty well."
Evans also floated the idea of additional fiscal stimulus later in the year to help short-term growth.
"We definitely need to address our fiscal challenges over the medium and long term, get a handle on long-term entitlement programs" Evans said. "But we also need better growth right now. We could benefit from some short-term fiscal stimulus that is done smartly that could add to growth."
Fiscal policy has subtracted about one percentage point from GDP growth this year, though sequestration and tax hikes earlier in 2013, and the debt ceiling debate and federal government shutdown this month, he said.
"Congress and the President are focused on something else, I guess," Evans said, "because we're doing our best to get things moving more quickly."
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