Will the Fed Raise Rates? Maybe Not
“The outlook for inflation remains too low,” Chicago Fed President Charles Evans said in remarks prepared for delivery to a Manufactured Housing Institute forum in Chicago. “A gradual path of normalization would balance both the various risks to my projections for the economy’s most likely path and the costs that would be involved in mitigating those risks.”
Evans is one of a handful of Fed policymakers who believe the central bank should not raise rates next month, even as economists largely believe it will and traders are pricing in a 70 percent chance of a hike.
Unemployment has fallen to 5 percent, half its peak during the 2007-2009 recession and just above what most agree is probably the minimum level before inflation pressures begin to build. But with low oil prices and a strong dollar putting downward pressure on prices, Evans expects inflation to still be below the Fed’s 2 percent target even by the end of 2018.
It remains unclear whether Evans would use his vote to protest a rate hike next month. The Fed has kept its benchmark overnight lending rate at near zero since December 2008.
He repeated on Thursday he is more focused on making sure the pace of rate hikes overall is slow than on the exact timing of the initial hike, saying it could be appropriate for the Fed’s key interest rate to still be under 1 percent at the end of 2016.
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