Fed Evans "Expect Smaller Rate Hike This Year"…Daily "Long Way to Go"

by Cho Seulkina

Published 03 Aug.2022 04:27(KST)

[Asia Economy New York=Special Correspondent Joselgina] Charles Evans, President of the Chicago Federal Reserve Bank, stated on the 2nd (local time) that the Federal Reserve (Fed) will continue raising interest rates until inflation slows down, but he hopes to slow the pace of rate hikes within this year.

According to the Wall Street Journal (WSJ) and others, President Evans said at a briefing that after two consecutive giant steps (0.75 percentage point rate hikes), the Fed is expected to raise rates by 0.5 percentage points at the Federal Open Market Committee (FOMC) meeting in September.

Evans said, "If I really think the situation does not improve, a larger rate hike in September would become important," but added, "A 0.5 percentage point increase is a reasonable assessment, but 0.75 percentage points could also be acceptable." He further expressed hope for 0.25 percentage point hikes at the remaining FOMC meetings in November and December this year and into early 2023.

He mentioned, "Despite the inflation report in June being less smooth than expected, I still expect this rate path to ultimately be a reasonable course."

Additionally, he said that if inflation does not show progress toward the Fed’s target range of 2%, the Fed may continue tightening for a longer period.

On the same day, Mary Daly, President of the San Francisco Federal Reserve Bank, told CNBC, "There is still much to be done before the Fed can control inflation. This means more rate hikes," indicating that the tightening stance will continue.

Daly warned, "Our work is not finished yet," and cautioned that the market should not interpret the Fed’s consecutive giant steps as a signal that the size of rate hikes will soon be reduced. Regarding forecasts that the Fed might cut rates around next summer due to a slowdown caused by tightening, she called it a "riddle" and said, "I don’t know what part of the data shows such signals." She predicted that the Fed will keep rates high for some time after raising them.