Chicago Fed President Charles Evans said Wednesday that he had urged his colleagues at the central bank’s last meeting in December to wait until mid-year to decide whether to raise interest rates again because it would probably be clear by then if pressures now holding down inflation would abate.
“I’d feel a lot more comfortable if I saw those transitory reductions in the inflation rate go away,” Evans said, according to Reuters.
Evans was one of two Fed officials who dissented from the Fed’s decision to raise interest rates last month, the third rate increase in 2017.
Inflation data during 2017 largely surprised to the downside. For Evans and other doves at the central bank, this raised concern that inflation would not hit the central bank’s 2% target, as most of their colleagues expect.
The core rate of the Fed’s preferred inflation target, the personal consumption expenditure index, rose at a 1.5% rate over the 12 months ended in November.
Evans will not be a voting member of the Fed’s rotational interest-rate committee this year.
Recent dovish rhetoric from Fed Officials Kaplan, Evans, and Kashkari have yet to put a damper on CME Group’s rate hike projections. Projections for a rate hike at the March FOMC meeting stand at 68% pic.twitter.com/loFRSvMDNv
— DailyFX Team Live (@DailyFXTeam) January 10, 2018
The Chicago Fed president said he was not concerned with the flattening of the yield curve last year and the prospect it might even invert. Inversions of the yield curve — when long-dated yields are lower than short-term yields — are taken by many to be possible signals of a recession.
Evans said the flatter yield curve simply reflected the widely held view that the “neutral” interest rate needed to keep the economy growing steadily is now closer to 2.7% than prior expansions when it was closer to 4%.
Read: Why the yield curve flattening — a recession red flag — is the ‘real deal’