Fed’s Evans sees inflation falling below central bank’s 2% target after current rise subsides
The current spate of inflation won’t last and ultimately will fall below the Federal Reserve’s target, Chicago Fed President Charles Evans said Tuesday.
While inflation by some measures is running at a 30-year high, Evans told CNBC the supply chain bottlenecks and other issues will subside and price pressures will fade.
“I’m comfortable in thinking that these are elevated prices, that they will be coming down as supply bottlenecks are addressed,” he told CNBC’s Steve Liesman during a “Squawk Box” interview. “I think it could be longer than we were expecting, absolutely, there’s no doubt about it. But I think the continuing increase in these prices is unlikely.”
Inflation has been at 3.6% year over year in the past couple of months, the highest since the early 1990s, according to the Fed’s preferred gauge. Other measures, such as the consumer price index, have inflation running even hotter.
Evans acknowledged that the trend is putting pressure on the economy.
However, interest rate increases are not expected to being until at least the end of 2022, according to current Federal Open Market Committee projections. Market pricing sees the first hike coming either in November or December of next year, according to the CME’s FedWatch tool.
While Evans said he is on board with the tapering, he said the Fed soon will be facing the familiar change of keeping inflation elevated to healthy levels, and likely will have to keep rates low.
Reference: CNBC
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