Fed’s Evans sees another jumbo rate hike on table in September

Federal Reserve Bank of Chicago President Charles Evans said policy makers could deliver a third straight jumbo increase in interest rates when they gather Sept. 20-21.

“I think that we’ve got a good plan in place. We could very well do 75 in September,” he said Thursday during remarks at an event hosted by the College of DuPage in Glen Ellyn, Illinois. “My mind is not made up. I do know that we need to be increasing interest rates up to a substantially higher level than where they are now,” said Evans, who does not vote on monetary policy this year.

U.S. central bankers are raising interest rates rapidly to curb the hottest inflation in four decades. Chair Jerome Powell has kept the option open for another 75 basis-point move in September — following increases of that size in June and July — or a half-point increase. He’s said the decision depends on the “totality” of the incoming data.

“I think the precise path is less important than just constantly telling people, we’re on this path, this is what we’re going to do, inflation is job one, we’re going to handle this,” Evans said.

The Chicago Fed chief, who in the past has been viewed as belonging to the dovish wing of the U.S. central bank, said he was confident that officials could achieve a soft landing that curbs inflation without causing a recession.

“Unemployment is 3.7% right now. I’m optimistic that we’re going to be able to navigate this and keep unemployment to about 4.5% by the time we’re done,” he said. “That would still be a pretty good outcome, although it will be costly for some.”

Speaking later with reporters, Evans said the danger of over-tightening policy would grow once rates reached 3.5%.

“I would prefer to find an appropriate spot to pause and monitor how things are going, rather than go much higher — potentially overshoot,” he said. “I wouldn’t say that I’m advocating sort of pausing at 3.5%, because I think 4% is more likely.”