MNI: Fed's Evans Open To More Rate Hikes, Earlier QT

Federal Reserve Bank of Chicago President Charles Evans on Wednesday said he was open to more than four interest rate increases this year as well as an earlier start to balance sheet reduction, as inflation has been higher and longer lasting than he expected.

"The inflationary environment is more intense than I was expecting as of December. The employment improvement has been better and smoother than last year," he told reporters after giving a talk at the Lake Forest-Lake Bluff Rotary Club in Chicago.

He had penciled in four quarter-point rate hikes for the year in December, but with inflation surprisingly high, "we’ll probably get more rate increase in succession than I previously thought, then see if we’re on our way for a much larger number than four."

"If there are good arguments for adjusting the balance sheet sooner I will be listening intently," he added.

The Fed should know more about the exact effects of the war in Ukraine, how higher oil prices could affect consumer inflation expectations, and broader supply chain challenges by the second half of the year, he said.

"We’re trying to get positioned in the neighborhood of knowing the ultimate amount we need, getting to neutral or getting beyond that," he said. "The U.S. is still going to have a vibrant labor market and strong growth but a lot of uncertainty."