Chicago Federal Reserve President Charles Evans on Wednesday said inflation is too high and needs to be addressed by monetary policy.
"Inflation is quite a risk to economic growth," Evans highlighted during a live event. "We need to alter monetary policy so it is moving towards a neutral stance," he added. And if inflation accelerates, "we can hike rates even faster."
With the target range for the Fed funds rate at the lower-zero-bound in the backdrop of surging inflation, "we need to go above a zero rate by quite a bit, and we are going to get a move on," Evan's noted. He expects the Fed to start reducing the balance sheet by mid 2022.
Evans sees headline inflation to likely stay above 3% by the end of 2022, and down to 2.5% next year. It will take until 2024 to get to 2% - the Fed's average target. Meanwhile, demand is still strong in the face of supply chain disruptions, hence consumer price inflation is at its highest level in 40 years. Note Q1 real GDP growth is estimated at 0.0% as of Tuesday, according to the Atlanta Fed's GDPNow update.
Earlier, Fed Chair Jerome Powell said the central bank needs to be nimble as the economy evolves.