Fed's Evans Bolsters Case for Skipping September Hike


Federal Reserve Bank of Chicago President Charles Evans suggested in a Monday evening speech at New York University that there might just be two rate hikes this year -- no additional -- and expressed some concern about inflation running below the Fed's target.

Here's what he had to say about future rate hikes:

It remains to be seen whether there will be two rate hikes this year, or three, or four-or exactly when we start paring back reinvestments of maturing assets. Regardless, the important feature is that the current environment supports very gradual rate hikes and slow preset reductions in our balance sheet.

He also told reporters after the speech that the Fed might wait until December for the next hike.

And here are his main thoughts on inflation:

We made some noticeable progress toward our inflation goal when it rose from 1.4 percent in 2015 to 1.7 percent in 2016. But, as of last April, core PCE inflation had slipped to 1-1/2 percent, and last week's Consumer Price Index (CPI) data do not bode well for PCE inflation in May.

He says he is less "sanguine" than many other FOMC members about progress on inflation, adding:

I also see downside risks to this outlook. So I believe we need to demonstrate a strong commitment to hitting our symmetric inflation objective sooner rather than later.

Russ Certo of Brean Capital wrote to clients:

Bond traders are ramping up wagers that the Federal Reserve is done raising interest rates until December. Open-interest data from the eurodollar options market in the wake of the Fed's rate hike last week show traders are piling into a bet already popular in futures: that the central bank will skip a September rate increase and wait until the final policy meeting of the year to tighten again. That's reflected in the buying and selling of call spreads on futures contracts.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas


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