The US Chicago Federal Reserve President Charles Evans says that the December rate hike is possible, but the inflation needs to be observed before any move. Will the US central bank decide on raising rates this year?
Fed Evans: December rate hike is possible
Mr. Evans stated that the costs of the rise in inflation above Fed’s two-percent target currently are less than in the past. He believes that the US economy is still not at full employment and is in unusual stance, compared to the past years. Charles Evans has also commented:
“I see benefits to trying to engineer policy to allow for the strong possibility of inflation overshooting its target. I also think it would help to indicate that policymakers would be willing to accept the increased inflationary risk that might accompany further declines in unemployment.”
He moreover stated that he “could be fine” with the Fed rate hike in December. However, he wanted to observe the US economy and inflation progress before making any moves. Mr. Evans further warned that it might be better to wait until the US inflation levels will rise closer to two-percent target before deciding on the rate hike.
Chicago Fed President stated that any increase above the Fed target would be minimum now, so “if it became necessary, a policy wouldn’t have to do much work to lower inflation expectations back down to 2 percent.”
US job gains and inflation need to grow further
Mr. Evans does not have a right to vote in this year Fed policy decision process, but he will gain this right in the upcoming year. The US Fed did not raise the interest rates since last December when the central bank raised rates from near zero. Market experts believe that the likelihood Fed will perform the December rate hike is quite high right now in case the US job gains and inflation will continue to move in the positive direction.
Fed is expected to meet in the beginning of November, but the analysts do not expect any move from the central bank during the gathering due to the upcoming US Presidential elections.
Last Friday non-farm payroll report indicated that while US employment growth is decelerating, it still performing well above the required level.
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