MNI: Fed Rate Hikes Must Be Cautious, Evans Says

Chicago Federal Reserve President Charles Evans said Thursday that interest-rate hikes must remain cautious and be done on a meeting-by-meeting basis, while saying his views on tightening are in line with the median FOMC's dot plot projection.

The Ukraine conflict and new waves of Covid being seen abroad are upside inflation risks that officials will monitor closely, Evans said, and "our recent 25 basis point rate hike was the first of what appears to be many this year.” The latest dot plot called for the equivalent of seven quarter-point moves this year and three next year.

“Policymakers need to be cautious, humble, and nimble as we navigate the course ahead. Monetary policy is not on a preset course: Each meeting’s decision will be based on an assessment of economic and financial conditions at the time, as well as the risks to the outlook,” Evans said. His prepared text didn't mention much about how to slim down the balance sheet or about hiking by 50bps, an option recently signaled by Fed Chair Jerome Powell.

The job market is "downright tight" and his speech in Detroit mentioned supply-chain pressures such as the global auto chip shortage, while also expressing optimism that companies over time will be able to deal with the backlogs and slow inflation. "As we continue to adapt to and better control the virus, as market forces work to reallocate productive resources, and as monetary policy tightens, we should see a reduction in inflationary pressure," he said.