Fed's Evans: 'Very Safe' to Foresee Two Rate Rises in 2017

Fed, Federal Reserve, FOMC, FBN

Chicago Fed President Charles Evans Wednesday left the door open to the Federal Reserve raising interest rates as many as four times this year, if the economy develops at a faster clip than expected.

"Now we're at the point where fundamentals are solid. I have a lot more confidence that two total rate increases in 2017... seems very safe," he told reporters after a speech here. He said three rate rises would be possible if there's more confidence in the outlook. "Four? Could work out that way if things proceed even better," he said.

Speaking about inflation in the U.S., Mr. Evans said that the rate was moving toward the central bank's 2% target in a "solid enough" fashion, though he remained "nervous."

The Fed had the important task of living up to its symmetric inflation target, he said. "We should be averaging, going forward, 2%, not leaving inflation on the table, so to speak, or overrunning unnecessarily."

Mr. Evans said he is willing to let inflation drift a little bit over 2%, and noted that he might be more patient than other policymakers in this respect.

"I think that a little bit of inflation above 2% is consistent with our symmetric 2% objective; I'm not going to get my nose out of joint over that," he said. "Whereas other people might be wanting to, I usually say, thread the needle to 2% a little more carefully; I want to make sure we get to 2%."

In prepared remarks, Mr. Evans reiterated his support for higher U.S. interest rates, adding he sees an increasing chance the economy could perform better than he expected.

"The progress made toward the [Federal Open Market Committee's] dual mandate goals justifies our recent rate increases, and my current outlook envisions the fed-funds rate moving up over the next few years along a path roughly consistent with the median FOMC projection," which holds for about two more increases this year.