The US Federal Reserve could raise interest rates by 50 basis points at its next monetary policy meeting in September if inflation does not improve, while a 75 basis point increase is also on the table, Chicago Fed chief Charles Evans said today as reported by Reuters.
“If anybody really thinks it’s not getting better … 50 (bps) is a reasonable assessment, but 75 might be OK. I don’t think anything higher is needed,” Evans told reporters on the sidelines of an event. at the bank’s offices in Chicago.
The official also noted that he remains hopeful that if inflation finally starts to ease, the central bank will be able to go ahead with a 50bps move. in two months, to be followed by a series of increases of 25 bp. the first half of next year.
The US central bank raised interest rates by 75 basis points last week to 2.25% from 2.50%. This was the second consecutive increase of 75 bp. while overall since last March interest rates have increased by 225 bp. in one of the most aggressive moves in the bank’s history to counter the rally in inflation.
Evans estimated today that interest rates should rise to 3.75% to 4% by the end of next year, although he warned that too much speed in reaching that level could eventually lead the Fed to revise its strategy because of rapid changes in the economic environment.
The official finally said he has revised downward his forecast for the economy this year and now sees growth at around 1% or lower, though he noted he believes the Fed has room to reduce inflation by keeping unemployment below 4.5%.
Source: Capital
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