Chicago Federal Reserve Chairman Charles Evans said today that he expects the equivalent of six other increases in US interest rates, by 25 basis points each time until the end of the year and another three next year.
These increases will drive the US Federal Reserve’s interest rate to 2.75% – 3% by the end of 2023.
“This is slightly above the average long-term estimate of 2.4% and thus represents a slightly restrictive direction in monetary policy,” Evans said in a speech in Detroit today.
The Fed official warned that since the summer, inflation has intensified and now covers a wide range of products and services. “This is a sign of further pressure from accumulated demand, with supply being asymmetric,” he said.
He also noted that if the Fed does not react effectively, the public will expect even higher inflation and the central bank will then have to “make an even greater effort to curb prices.”
The Fed made the first rate hike since 2018 this month, taking the first step to tackling the inflation rally to a 40-year high. The increase was by 25 basis points, confirming analysts’ estimates.