Fed's Evans hopes rate hikes to cool prices

Federal Reserve Bank of Chicago (FRB) Chairman Charles Evans expects the Fed's course of monetary tightening to be sufficient to lower inflation in the U.S. Last week’s report on consumer prices turned out to be worse than experts forecasted.

In an interview on October 19, Evans said the country’s inflation is too high. So, there is a need to follow the planned course to reduce it. The FRB Chairman doesn’t lose hope that these measures would be enough to meet the goal. 

Fed officials projected an interest rate hike to 4.5% in 2023 at the regulator's session in September. 

Evans warned preventing an economic slowdown is "a key objective". Thus, if the monetary policy is tightened beyond the expected level, there is a possibility of the U.S. recession.

The next Fed meeting is scheduled for November 2. Investors expect the fourth consecutive rate hike of 75 basis points. That’s where rates may hit a high of 4.9% by the beginning of 2023.

The Labor Department report also boosted market expectations. Consumer prices, excluding food and energy costs, surged by 6.6% as of September. These indicators marked the second month of accelerating core inflation in the U.S.

According to September’s forecast, the rate hike may cause worsening of the country’s economic prospects. Issues such as increased unemployment are likely to take place. However, Evans noted the growth wouldn’t be so significant in the short run.

If the key rate continues to hike, the economic pressure will also increase. As the FRB chairman said, that would be a kind of "nonlinear event”.