Tags: federal reserve | charles evans | rate hike | economy

Fed's Evans: Rate Hike Possible at Any Meeting

By    |   Thursday, 07 May 2015 01:07 PM

The Federal Reserve could raise interest rates at any meeting, including in June, Chicago Fed President Charles Evans said Thursday in an interview on CNBC.

"We are going into each meeting from now on talking about what the policy rate should be and at the end of every meeting, it's possible that we'll decide to begin the renormalization process," he said.

Evans, a voter this year on the Fed's policy-setting panel, repeated his view that waiting until 2016 to raise rates would allow the Fed to be more confident that an excessively low rate of inflation will head back up to the U.S. central bank's 2-percent target.

"There are uncertainty reasons to sort of make you say, 'Why should you be in a rush to do this,'" he told CNBC.

"Accommodation is helping the economy move up," he said. "And if inflation were to pick up more strongly than I'm expecting, we know how to deal with that, we can increase rates."

Still, he was optimistic that weak first-quarter growth would prove transitory, that growth will bounce back to 3 percent this quarter, and Friday's jobs report will show a monthly gain of more than 200,000 jobs.

"We kind of think that was transitory, in part because the dollar has been high, inventory accumulation was high, [the] consumer was weaker. But we think things are going to improve," he said.

He said he's looking forward to a stronger second quarter that's "more consistent with the stronger growth outlook that I and so many other people have of like 2.5 percent to 3 percent this year."

Evans defended Fed Chair Janet Yellen's decision to talk about stocks. "I think it's incumbent on us to talk about financial stability [and] financial instability risk."

"In that context, it's quite natural that policymakers and the chair of the Federal Reserve [are] going to make some comments," he said. "The stock market is high, there's no doubt about it." 

Highlights provided by CNBC of the wide-ranging interview:

EVANS ON ECONOMIC BOUNCE BACK

"I think we are expecting a bounce back. First quarter was weak, up only two-tenths, but we kind of think that was transitory in part because the dollar has been high, inventory accumulation was high, consumer was a little weaker, but we think that things are going to improve. So looking forward to a better second quarter number that would be more consistent with a stronger growth outlook that I and so many other people have, like 2.5 to 3% this year."

EVANS ON RATES

"I think optimum monetary policy would push it into 2016. I think that would be consistent with having more confidence and inflation is going to actually pick up, go to 2% relatively soon over the next one to two years. And I think there are uncertainty reasons, too, to sort of make you say why should we be in a rush to do this? You know, a combination which is helping the economy move up and if inflation were going to pick up more strongly than I am expecting, we know how to deal with that. We can increase rates."

EVANS ON IMPROVING THINGS

"Because the fundamentals – we're still increasing the fundamentals – we've been more exposed to negative events that have appeared to happen and cause the first half to be weaker for a number of years. Now, every year we are getting better and I think we are more resilient, so that is why I am looking for the second quarter, second half to be better and that should improve things."

EVANS ON THE ECB

"I think they still have a ways to go in Europe so I can't begin to guess how the yields will work their way out. They could retrace, but I am confident the ECB is going to continue with their chosen path for quite some time and that should reinforce the good accommodation."

EVANS ON BEING OPTIMISTIC

"We are going into each meeting from now on talking about what the policy rate should be and at the end of every meeting it's possible that we will decide to begin the renormalization process. Now, I am looking for 200 hundred-plus payroll employment over the next many months, growth above trend and that should be supportive of that. So I am optimistic. I've got 2.5 to 3% outlook for real GDP so I think that's good."

EVANS ON FED CHAIRMAN JANET YELLEN'S COMMENTS

"It's incumbent upon us to talk about financial stability, financial instability risk that we might be facing and so in that context, it's quite natural that policy makers and the chair of the Federal reserve is going to make some comments about leverage, how that's working its way through the economy. She said that financial stability risks are moderate on the basis of everything that we have looked and I think that's the larger takeaway so I think everybody ought to get used to us talking about financial stability issues."

(Reuters and CNBC contributed to this report)

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The Federal Reserve could raise interest rates at any meeting, including in June, Chicago Fed President Charles Evans said Thursday in an interview on CNBC. We are going into each meeting from now on talking about what the policy rate should be and at the end of every...
federal reserve, charles evans, rate hike, economy
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2015-07-07
Thursday, 07 May 2015 01:07 PM
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