Chicago Federal Reserve President Charles Evans said on Friday that U.S. monetary policy was likely to remain accommodative well into next year, but that the tools for shifting gear were being explored.

With inflation underrunning and the economy underperforming, interest rates would remain low for an extended period of time as the U.S. Federal Reserve monitored developments, Evans told reporters.

But U.S. policy-makers were already exploring ways to eventually shift to more restrictive policy when the time was right, he said, adding that members of the U.S. central bank's Federal Open Market Committee still had different perspectives.

Because we have a wide variety of tools, I am pretty confident that we can shift to a more restrictive policy when the time is appropriate. Presumably that is an extended period beyond where we are now, said Evans, a voting member of the FOMC in 2009.

At the moment we are making sure that we understand the tools that are available to us and the pros and the cons of all of them. We could find that some of them dominate others.

Such tools could involve interest on excess reserves as a way of tightening policy and perhaps simultaneously reducing the Fed's swollen balance sheet through such actions as reverse repurchases, he said.

There are a variety of things that we could do. Of course we could sell assets...we can always do that, we have done that in the past, he said.

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There were no clear preferences on how to proceed given that opinions among committee members differed, he said.

In some sense, my own view is that if you are able to move from a highly accommodative policy to one that is simply accommodative because that is the right trajectory, any configuration of those actions would be equally OK, he said.

The Fed cut the benchmark the federal funds rate to near zero in December and put in place a vast array of emergency liquidity facilities in an effort to combat the worst financial crisis and recession since the 1930s.

As part of its efforts, it has bought long-term government and mortgage-related debt to try to drive down borrowing costs.

Last week, St. Louis Federal Reserve Bank President James Bullard told the Financial Times that the Fed could remove some of the extraordinary support it has extended to the U.S. economy once the recovery looks solid.

Evans said in Paris that core inflation in the United States was likely to run at a relatively modest rate of around 1.5 percent over the coming two years.

I think that policy is going to be highly accommodative as it is now for quite some period of time, he added.

The unemployment rate in the United States was likely to rise over the coming two quarters, he said.

The U.S. economy was likely to grow by around three percent over the next 18 months and was expected to stage a modest recovery following a dire recession, he added.

(Reporting by Tamora Vidaillet; editing by Crispian Balmer and Chizu Nomiyama)

Inflation