Chicago Federal Reserve President Charles Evans on Thursday joined his fellow U.S. central bank policymakers in saying that getting high inflation down is “job one,” and to do so the Fed “could very well” raise interest rates by another 75 basis points this month.
There is a “decent chance” the result 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 do need to be concerned about the high inflation environment,” where inflation, currently at 6.3% by the Fed’s preferred measure, has been running above the central bank’s 2% goal since last spring.
Saying that he had not yet made up his mind on the right move at the Sept. 20-21 policy meeting, Evans made clear the point is that the Fed’s policy rate – now in the 2.25%-2.50% range – must rise to what he feels should be a 3.25%-3.50% range this year and to about 4.00% next year.
The U.S. unemployment rate, now at 3.7%, will also climb, but only as high as about 4.5%, much less than could be expected if the inflation battle were down to the Fed’s rate hikes alone, Evans said.
He added that he expects inflation to fall to below 3% next year, due not just to the Fed’s rate hikes but also as pandemic-tangled supply chains, a key driver of inflation globally, become unstuck.
As for U.S. growth, he said, “I think we’ll muddle through” with GDP growing about a half a percent this year and not contracting.