Fed's Evans, erstwhile dove, says may need 2022 rate hike

FILE PHOTO: Chicago Federal Reserve Bank President Charles Evans speaks during the Global Interdependence Center Members Delegation Event in Mexico City, Mexico, February 27, 2020. REUTERS/Edgard Garrido

(Reuters) -Chicago Federal Reserve President Charles Evans, one of the U.S. central bank’s most reliable policy doves, on Thursday said he is “open-minded” to adjustments in monetary policy next year, if inflation continues to stay high.

That’s not, he said, his expectation, given his view that price pressures will ease next year as supply chains get repaired and consumer demand now concentrated on goods shifts to services in what would be a return to a more normal economic balance.

But once the Fed finishes its asset purchase program in mid-2022, he said, the Fed will weigh how it should adjust its short-term policy rate, which it has held near zero since the start of the pandemic in March 2020.

Given uncertainty around COVID-19, “it might be a gentle increase; it could begin next year after we finish our asset purchasing program, or it could be as long as into 2023; it will depend on the data that we see and the state of inflationary pressures,” Evans said at a BKD Financial Services virtual symposium.

If inflation expectations move up more, he said, touching off an upward wage and price spiral, “that would lead to a requirement for more restrictive financial conditions.”

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