INSUBCONTINENT EXCLUSIVE:
CHICAGO: The Federal Reserve can stick to a series of gradual US interest-rate increases over the next couple of years without much risk of
December 2015 embarked on what is emerging as the slowest rate-hike cycle in its 100-year history, with its target range for short-term
borrowing costs now at 1.5 per cent to 1.75 per cent despite what Evans called an economy that is firing on all cylinders.
Some economists
have warned that the Fed may need to raise rates faster to prevent inflation from accelerating, now that unemployment is at 4.1 per cent and
expected to fall further as consumer and business spending, along with expansionary fiscal policy, fuel economic growth.
But to Evans, there
is little risk the Fed will repeat the mistakes of the 1970s, when policymakers allowed the labor market to overheat, unleashing inflation
and forcing the central bank to jack up rates aggressively in response
A recession ensued.
This time around, Evans said, inflation and inflation expectations are low and it is difficult to imagine escalating
inflation without sharp wage gains that are not in evidence
If low unemployment continues to put little pressure on inflation, he said, the Fed may indeed be able to make smaller adjustments to
trying to fix the mismatch between the needs of employers and the skills of available workers that may be the root cause.
