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Thursday, March 24, 2016, Chaitra 10, 1422 BS, Jamadius Sani 14, 1437 Hijri


As Fed eyes two rate hikes, dovish Evans is no longer fringe
Published :Thursday, 24 March, 2016,  Time : 12:00 AM  View Count : 13

CHICAGO, March 23: The UScentral bank has become so cautious about raising interest rates at even a moderate pace that the once-fringe preference of one of its most dovish policymakers for super-slow interest-rate increases has gone mainstream.
On Tuesday, Chicago Fed President Charles Evans said he expects two rate hikes this year, given his forecast for 2 per cent to 2.5 per cent economic growth and for unemployment to fall further to 4.75 per cent by the end of the year.
US Treasury yields rose, as traders took his comments to be bullish for the US economy.
Evans, however, was hardly staking out new ground. This was the same call that he had made last December, when the Fed raised interest rates for the first time in nearly a decade.
But at the time Evans' call was an outlier, with most of his colleagues expecting four rate hikes this year. Now the majority of policymakers, including Evans, see just two rate rises, based on forecasts released last week when the Fed decided to wait for more economic data before raising rates.
The Fed's "cautionary pause in the rate normalization path is about assessing risks and just being careful," Evans told the City Club of Chicago. "The continuation of a 'wait and see' monetary response is appropriate to ensure economic growth continues, labor markets strengthen further, wages begin to increase more, and all of this supports an eventual increase in currently low inflation right back up to our 2-per cent objective."
Evans declined to say when he expects the Fed to end its pause and raise rates. But he made it clear that he is no longer struggling to convince colleagues with clearly more hawkish views.    ?Reuters










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