Even though a global slowdown threatens the U.S. recovery, the biggest risk facing the nation's economy would be decision by the
The Fed should be patient in deciding when to start hiking its benchmark short-term interest rate, which has been near zero since late 2008, said
Fed policymakers even should be willing to accept modestly higher inflation to make sure the timing of the increase is right, he said Monday in a speech in Indianapolis.
"I believe that the biggest risk we face today is prematurely engineering restrictive monetary conditions," Evans told the annual conference of the National Council on Teacher Retirement.
"I favor delaying liftoff until I am more certain that we have sufficient momentum in place toward our policy goals."
Helping fuel his caution are concerns that slower economic growth in Europe, Japan and elsewhere could reduce demand for U.S. exports and hinder the recovery here.
Evans is one of the leading so-called doves on the policymaking Federal Open Market Committee, a term for officials willing to tolerate higher inflation in order to lower unemployment.
Fed Chairwoman Janet L. Yellen is among the doves, and analysts have been listening closely to statements by her and other central bank policymakers to determine when interest rates might rise.
Evans is an alternate member of the committee, but will rotate into a voting slot next year.
The Fed is under internal and external pressure to start raising interest rates as the U.S. economy strengthens and unemployment falls.
The unemployment rate dropped to 5.9% in September, the lowest in more than six years, and has fallen faster than most economists had expected.
Analysts predict the Fed will start raising interest rates in the middle of next year.
On Monday, Evans pushed back against those who want the Fed to hike interest rates earlier to avoid the potential that its easy money policies will cause prices to soar as economic growth improves.
"I am very uncomfortable with calls to raise our policy rate sooner than later," he said.
Evans noted that inflation has been running below the Fed's annual target of 2% and the chances of a jump "noticeably" above that level is "not at all very likely today."
"Indeed, many Fed critics have been voicing this concern since 2009, and it hasn't even come close to happening," he said.
Although the labor market is improving, wage growth is still sub-par and the unemployment rate probably understates the jobs situation, Evans said.
Fed policymakers should start raising rates "only when we have a great deal of confidence" that the economy has enough momentum to sustain the recent improvements.
At that point, he said, the Fed should "proceed cautiously" and raise interest rates slowly, at least at first, to make sure the economy can handle it without slowing down, Evans said.
"I look forward to the day when we can return to business-as-usual monetary policy, but that time has not yet arrived," he said.