2018.04.1800:10:00UTC+00 Fed Can Keep Rate Increases Gradual Without Risk of Inflation: Evans

The Federal Reserve can stick to a series of gradual U.S. interest-rate increases over the next couple of years without a threat of an unwelcome surge in inflation, according to Chicago Fed President Charles Evans.

In an address to the Chicago Rotary Club, the Fed official said he does not foresee an outsized risk of a surge in inflation. Evans said that as long as the current conditions continue, the U.S. central bank can hike rates gradually while monitoring any increasing inflationary pressures.

In December 2015, the Fed launched what is becoming the slowest rate-hike cycle in its history, with its target range for short-term interest rates now at 1.5 percent to 1.75 percent.

Some economists cautioned that the Fed may need to hike rates at a faster rate to prevent inflation from speeding up, now that the jobless rate is at 4.1 percent and expected to decline further as consumer and business spending, along with expansionary fiscal policy, power economic growth.

However to Evans, there is little threat the U.S. central bank will repeat the error of the 1970s, when policymakers allowed the jobs market to overheat, releasing inflation and coercing the central bank to boost rates aggressively in response, and a recession ensued.

Under the present circumstances, inflation and inflation expectations are low and it is challenging to imagine rising inflation without significant wage gains that are not showing.