Chicago Fed Evans says rate hike is imminent, as he believes that the inflation should grow and the unemployment rate fall further. Will we witness the rate hike in December?
5 October, AtoZForex – Charles Evans, the President of Chicago Federal Reserve (Fed) Bank has made it clear that he is ‘fine’ with interest rate hike in the current year in case US economic data continued to be strong.
Chicago Fed Evans: rate hike is imminent
Mr. Evans told in the speech on Wednesday:
“I have a forecast where things continue to improve. I do think there will be a rate increase.”
He additionally stated that he would be ‘fine’ for rates to increase by the end of 2016, adding that any move would likely come at the December Fed gathering. Evans also highlighted the fact that the timing of the next possible hike was of less importance than how tightening was implemented beyond that.
Mr. Evans further stated that he would want to see the inflation to grow and the unemployment fall further. He stated:
“I am less concerned about the timing of the next increase than I am about the path over the next three years.”
The unemployment rate is to decrease
Being asked about the possible US election impact on the monetary policy, Mr. Evans’s answer was “we don’t know.” As Mr. Evans believes that rate hike is imminent, he stressed that the Fed will be keeping an eye on the government’s position on fiscal policy. Mr. Evan added:
“What the central bank needs to do is have a view point on whether or not the fiscal policy is going to be stimulatory or contractionary on the economy over the next three to five years and then we have to decide if we need to take action to offset its effects on inflation.”
During his speech, Evans also stated that he would like communication to become more explicit about the matter of rate change. He added that the inflation expectations should be reflecting theFed’s inflation-target. As for the unemployment, Mr. Evans estimates the natural rate of unemployment as 4.7 percent and expects the rate to decrease to 4.25 percent by the end of the year 2019.
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