Noor Trends News, Technical Analysis, Educational Tools and Recommendations
Chicago Federal Reserve President Charles Evans said on Thursday that three rate hikes in 2022 would be a good “opening bid”, though it could be four if inflation doesn’t improve fast enough.
Evans added that he is reluctant to declare that the US has reached full employment, but that inflation is “much too high” and controlling price pressures is now the best way of assuring the economic recovery.
Evans went on noting that the Fed’s balance sheet is “very large” and the bank will likely start shrinking it “sooner than later” following rate increases. Evans said that he sees inflation dropping back under 2.5% by the end of 2022, with most of that adjustment a result of real not monetary factors.
Officials should think seriously about raising interest rates at the Fed’s March meeting, he added, adding that the Fed is still grappling with how fast policy should reach the neutral rate of interest.
Earlier during Thursday’s trading session, Fed’s Evans said that inflation is too high and that monetary policy is not well-positioned for this. As a result, the Fed will be adjusting monetary policy to something closer to neutral and that the Fed strongly expects between two and four rate hikes in 2022.
Key Quotes:
“Demand for goods has exploded, but for services is woefully below where it was.”
“We’ve seen wage pressures, price pressures.”
“Prices of goods in really high demand, short supply have skyrocketed.”
“After we end bond purchases we’ll start thinking about how to bring the balance sheet down.”
“Don’t believe inflation will stay this high.”
“Inflation will come down because supply chains will improve, demand will fall a little as we raise interest rates.”
“Labour force challenges will persist for quite some time.”
“Stance of monetary policy is ‘wrongfooted’ given high inflation.”
“We need to get inflation back down to the 2% ballpark.”
“Inflation likely to be 2.5% at end of this year.”
“Inflation will be adjusting for ‘real reasons’ like supply chain, business conditions.”
“My forecast in December was aligned with 3 rate hikes in 2022.”
“Expect the economy will continue to ‘power through’ the pandemic.”
“I think current unacceptably high inflation rates will come down.”
“We need to preserve price stability.”
“Because inflation has stayed high longer we have to take action quicker than I thought.”
“We still need patience along the path of removing accommodation.”
“Expect unemployment to be around 3.5% by end of year.”
“I expect the tide of inflation will have turned by the end of the year.”
“I think it will take a couple years to get rates to neutral, but that could be accelerated.”
