(Businesshala) – Chicago Federal Reserve Bank Chairman Charles Evans said on Thursday he believes the supply shocks that are now pushing prices will ease next year, and push US inflation to 2%. Bringing back would still require low interest rates.
“Let’s be patient and don’t declare victory over inflation,” Evans said in an online webinar with Princeton University’s Bendheim Center for Finance.
Inflation, he said, will fall to around 2.1% next year and could rise to 2.4% in 2023 as the Fed begins what it anticipates will be a very gradual pace of interest rate hikes.
If inflation rises above that level, he said, he would like to tighten policy more quickly, but that is not his expectation.
Their reading on a wide range of inflation expectations measures does not suggest that the recent higher inflation readings are implicating the long-term trajectory for US prices.
Inflation expectations are “not getting out of hand,” Evans said, adding that his concern remains whether they are still high enough to be in line with the Fed’s 2% target. “We’ve lowered our 2% inflation expectation almost since we announced it in 2012.”