Fed’s Evans says bar high for any rate move in April

The Federal Reserve is unlikely to raise U.S. interest rates when it meets later this month but seems to be on track for at least two increases over the rest of this year, Chicago Fed President Charles Evans stated Friday.

“Going into the next meeting I think there is a reasonably high hurdle for taking any action,” Evans said, but added that he still sees two rate hikes as likely appropriate over the course of the year.

“The fundamentals of the economy are still pretty good and consistent with a gradual normalization…Maybe it is June. Maybe it is a little later.”

Evans spoke in Washington at an investor conference held by JP Morgan on the sidelines of the semiannual meetings of the International Monetary Fund and World Bank.

Since its initial rate hike in December, the Fed has slowed its expected pace of subsequent increases in response to risks that a slowdown in the global economy could be more severe than expected. Some of those risks have receded, allowing the Fed to debate when to resume raising its target rate.

But Evans said the horizon was not fully clear, and that in particular the U.S. central bank needed to be sure inflation would rise to its two percent target.

The path of inflation will “inform” the Fed’s decisions in coming months, Evans said, arguing that policymakers need to prove to investors and households that they are serious about reaching the inflation goal – even at the risk of overshooting.

“Inflation is the responsibility of the central bank. If we are at one percent and it is supposed to be two percent, that is us. If it is three percent, that is us,” Evans said.

Source: Reuters

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