Chicago Federal Reserve President Charles Evans said Monday that U.S. unemployment would likely peak around 10.5 percent in spring 2010 and probably won't begin to decline until the summer.
Evans also said in an interview with Financial Times that the Fed would probably keep interest rates near zero until late next year, at the earliest.
"I would expect that we'll level off and have the same unemployment rate for a few months probably, before it starts to come down," he said. "And it might even go up and down for a couple of months."
Evans added that unemployment should drop to about 9.5 percent by the end of 2010, after economic expansion picks up in the second half of that year.
Commenting on the economy, the Chicago chief told Financial Times that he expected the economy to be uneven through the first half of next year before the "private sector begins to pick up more steam" in the second half of the year.
He added that he expected 1.3 percent core inflation in 2010, and 1.5 percent core inflation for a couple years after that, adding that the risks for inflation are leaning to the downside.
Though Evans also said that there was also a "significant" possibility that inflation could rise, he added that the economy was running under his inflation expectations.
"I think that's easily into 2010 and frankly I wouldn't be surprised if that doesn't translate into at least the middle of 2010" - with the first rate increase coming in "late 2010, perhaps later in terms of 2011," he told Financial Times.
Evans is a voting member of the Fed's Federal Open Market Committee, which determines the central bank's monetary policy. His remarks on the interest rate come days after St. Louis Federal Reserve President James Bullard, who will be a voting member of the FOMC next year, hinted that the Fed may keep interest rates low until 2012.
"The FOMC did not begin policy rate increases until 2 1/2 - 3 years after the end of each of the past two recessions," he said last Thursday.
The St. Louis chief also made headlines Sunday when he suggested to reporters that the Fed should keep its asset purchase program, which is set to run through next March, for a longer period of time.
I would just like to keep them active at a very low level," he told reporters delivering a speech in New York. "Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in."
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.