Fed's Charles Evans says he's optimistic on inflation, wants rate hikes

Chicago: Chicago Federal Reserve Bank President Charles Evans, one of the Fed’s most dovish policymakers, said Saturday that he is optimistic inflation will reach the Fed’s 2 per cent goal and that slow, gradual rate increases will be appropriate.

“Fiscal policy has been much more supportive of further growth and so the need for accommodative monetary policy is less than it was before,” Evans told reporters in comments after a talk at the University of Chicago Graduate China Forum.

The Fed next meets to set policy in June. If it remains on track for 2 per cent, and inflation expectations rise, “continuing our slow, gradual increases will be appropriate to get us to the point where monetary policy isn’t really providing more lift to the economy.”

Evans comments on Saturday are notable because they suggest that one of the Fed’s most outspoken rate-hike skeptics backs further hikes even as worries about a potential trade war roil global equities markets.

China warned on Friday it was fully prepared to respond with a “fierce counter strike” of fresh measures if the United States follows through on President Donald Trump’s threat to slap tariffs on an additional $100 billion of Chinese goods.

Asked about the effect of the trade conflict on his rate-hike view, Evans suggested that while he is mindful of the potential impact and sees stable and predictable trade policy as supportive for business, it is too soon to see anything in the data.

“Even the fiscal policy effects are mostly in the future,” he said.

In December, Evans cast one of two votes against the Fed’s decision to raise rates, saying he wanted to give the economy more time to rev up and lift inflation and inflation expectations, which continued to linger below the Fed’s target even as unemployment dropped to levels not seen in 17 years.

Saying he would be surprised if inflation did not reach the Fed’s goal, given the “very strong” national economy and labor market, Evans suggested he would be on board with the three or four rate hikes for this year that most of his colleagues expect.

“I am optimistic that we are going get to 2 per cent; it would be surprising if we didn’t, I just want to make sure we do,” he said. “In that environment, a gradual increase in our interest rate range objectives is appropriate.”