This post was originally published on this site
The president of the Chicago Federal Reserve said the central bank is poised to approve a series of increases in interest rates, but he said high U.S. inflation is likely to remain above 3% through the end of the year.
Saying it’s “crucial” to deal with inflation, Chicago Fed President Charles Evans on Wednesday signaled the Fed is prepared to raise its benchmark short-term rate in March and subsequent meetings. The rate is now near zero.
“We’re going to get going early at the next meeting, next several meetings, for sure,” Evans told the Lake Forest-Lake Bluff Rotary Club Foundation in Chicago.
He also said the central bank will soon start to reduce its $9 trillion balance sheet. The Fed bought trillions of bonds during the pandemic to reduce long-term interest rates and spur more business investment and consumer spending.
“We’ll want to start reducing the size of our balance sheet. It’s very large,” Evans said.
The pace of U.S. inflation soared to a 40-year high of 7.5% in the 12 months ended in January, the consumer price index showed. The Fed’s preferred PCE inflation gauge rose at a somewhat slower 6.1% pace over the same span.
While Evans predicted the rate of inflation would likely return close to the Fed’s 2% target by 2024, he said it would probably be around 3% and 3.5% by the end of this year.
Fed Chairman Jerome Powell on Wednesday indicated in testimony to Congress that the central bank is on track to raise rates at its March 16 meeting. The increase would be the first in four years.
The Fed cut its benchmark rate to near zero early in the pandemic.
Evans is not a voting member this year of the Fed’s interest-rate setting board.
