Fed Evans: Fed likely to push rates beyond 'neutral' - Reuters
|According to Reuters, Chicago Federal Reserve head Charles Evans, one of the more hawkish Fed presidents, suggested that the US will likely have to lift rates above the neutral rate to keep inflation in check.
Key quotes
" “Given the outlook today, I believe this will entail moving policy first toward a neutral setting and then likely a bit beyond neutral,” Evans said in a speech originally intended to be delivered to a conference earlier this week in Argentina and released on Thursday. Evans does not have a vote on the central bank’s rate-setting committee this year but fully participates in deliberations.
The neutral rate is a level of interest that is seen as neither encouraging nor discouraging economic decisions, and is consistent with both stable inflation and strong employment.
Investors expect the Fed to raise its benchmark interest rate by a quarter percentage point to a target range of between 2 and 2.25 percent at its next policy meeting on Sept. 25-26 and see another rate rise in December.
In the prepared remarks, Evans said the central bank would have to tighten more quickly should inflation move “unacceptably” higher than the Fed’s symmetric 2 percent objective. Inflation has hit that Fed target in recent months after more than six years of undershooting.
Conversely, should uncertainty over trade caused by the Trump administration’s policies continue or there is a stalling of inflation expectations the Fed would need to raise rates more slowly, Evans said.
The central bank has already raised rates twice this year and seven times in total since it began a tightening cycle in late 2015.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.