FXStreet (Córdoba) - Chicago Federal Reserve Bank President, Charles L. Evans said today that he needs more confidence that inflation is heading toward the central bank’s target before calling for the first rate hike since 2006. Evans is currently a voter at the FOMC.
Key Quotes:
“Before raising rates, I would like to have more confidence than I do today that inflation is indeed beginning to head higher. Given the current low level of core inflation, some evidence of true upward momentum in actual inflation is critical to this assessment.”
“I believe that it could well be the middle of next year before the headwinds from lower energy prices and the stronger dollar dissipate enough so that we begin to see some sustained upward movement in core inflation. After liftoff, I think it would be appropriate to raise the target interest rate very gradually. This would give us sufficient time to assess how the economy is adjusting to higher rates and the progress we are making toward our policy goals.”
“Overall, my view of appropriate policy is somewhat more accommodative than what is represented by the median of the FOMC’s well-known “dot plot.”
“However, I am far less confident about reaching our inflation goal within a reasonable time frame.”
“Furthermore, maintaining credibility is key to effective policy. Thus, policy needs to validate our claim that we aim to achieve our 2 percent inflation target in a symmetric fashion.”
“In summary, regardless of when we begin to normalize policy rates, I believe that the rate increases should be gradual —both from the point of view of my baseline outlook for the economy and from a perspective where I have weighed the risks and potential costs of policy missteps. As we manage this next phase for monetary policy, it remains essential that we carefully articulate the rationale for our policies. This would ensure that monetary policy is transparent, accountable and effective.”
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