Fed's Evans: Need to carefully navigate to reasonably restrictive policy

Chicago Fed President Charles Evans said on Monday that the Fed needs to  "carefully and judiciously" navigate to a "reasonably restrictive" policy rate, as reported by Reuters.

Additional takeaways

"US can lower inflation relatively quickly without recession or large increase in unemployment."

"Target rate needs to rise a bit above 4.5% by early next year and remain there as Fed takes stock."

"Without a period of restrictive policy to restrain demand, inflation would not fall to anything near 2% target."

"Many risks could derail Fed hopes for soft landing including Ukraine war, slow supply improvement, covid and monetary policy either not fixing inflation or weighing more than expected on jobs."

"Maybe labor shortages are having an unusually large influence on inflation, which could allow fast improvement on inflation as the economy cools."

"Inflation is currently the Fed's primary concern."

"Good news is that longer-horizon inflation expectations have generally remained within a range consistent with 2% target."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen posting small daily gains at around 113.00.