Chicago Federal Reserve's president Charles Evans said on Tuesday that his viewpoint is roughly in line with the Fed median assessment for the federal funds rate of 4.25%-4.50% at year-end. He also noted that since the full effect of tighter financial conditions takes time to show through to output and inflation, at some point it will be appropriate to slow the pace of rate hikes and hold rates for a while to assess the impact on the economy.
The polycymaker acknowledged that reducing inflation is likely to require a sustained period of below-trend growth, and there will most likely be some softening of labor market conditions, but added that this is necessary to restore inflation to the Fed's 2%-target. According to him, low and stable inflation is a prerequisite for achieving the kind of sustained strong labor market outcomes that bring benefits to everyone. Meanwhile, failing to restore price stability, in his view, would result in far greater costs.