Hike rates

Fed ‘could very well’ hike rates 75 basis points this month, Evans says

Chicago Federal Reserve Chairman Charles Evans attends the Global Center for Interdependence member delegation event in Mexico City, Mexico February 27, 2020. REUTERS/Edgard Garrido

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Sep 8 (Reuters) – Chicago Federal Reserve Chairman Charles Evans joined his fellow U.S. central bank policy officials on Thursday in saying that bringing down high inflation is “a job”, and that to do so, the Fed “could very well” raise interest rates on another. 75 basis points this month.

There’s a “decent chance” the outcome won’t be a recession, Evans said at an economic forum held at the College of Dupage in Glen Ellyn, Illinois.

“We don’t want to unnecessarily restrict the economy,” he said. “But we have to be concerned about the high inflation environment,” where inflation, currently at 6.3% by the Fed’s preferred measure, has exceeded the central bank’s 2% target since last spring. .

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Saying he had yet to make up his mind on the right move at the September 20-21 policy meeting, Evans made it clear that the Fed’s key rate – now in the 2.25% to 2 .50% – should rise until he estimates it should be between 3.25% and 3.50% this year and around 4.00% next year.

The U.S. unemployment rate, now at 3.7%, will also rise, but only to about 4.5%, much less than you would expect if the battle against inflation were all about hikes. Fed rates, Evans said.

He added that he expects inflation to fall below 3% next year, due not only to Fed rate hikes, but also to supply chains tangled by the pandemic, a key driver of inflation around the world, are unblocking.

As for US growth, he said, “I think we’ll manage,” with GDP rising about 0.5% this year and not contracting.

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Reporting by Ann Saphir; Editing by Paul Simao

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