The Fed’s Evans is nervous about going too far and too quick with fee hikes

Charles Evans, President of the Federal Reserve Bank of Chicago, speaks at the National Association of Business Economics (NABE) Annual Meeting in Arlington, Virginia, Monday, September 27, 2021.

Al Drago | Bloomberg | Getty Images

Chicago Federal Reserve Chairman Charles Evans says he is concerned the Federal Reserve will raise interest rates too quickly to combat runaway inflation.

Speaking to CNBC’s Squawk Box Europe on Tuesday, Evans said he remains “cautiously optimistic” that the US economy can avoid a recession provided there are no further external shocks.

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His comments come shortly after a number of senior Fed officials said they would continue to prioritize fighting inflation, which is currently near its highest level since the early 1980s.

The central bank raised interest rates by three-quarters of a percentage point earlier this month, the third straight rise of three-quarters of a percentage point.

Fed officials also indicated that they would continue raising rates well above the current 3% to 3.25% range.

Asked about investor concerns that the Fed doesn’t seem to be waiting long enough to properly assess the impact of its rate hikes, Evans replied, “Well, that’s exactly why I’m a little nervous.”

“There are delays in monetary policy and we have acted swiftly. We’ve made three 75 basis point raises in a row and there’s talk of getting to 4.25% to 4.5% by the end of the year. There’s not a lot of time to look at every monthly release,” Evans said.

‘Peak Funds Rate’

Traders were concerned that the Fed will remain more hawkish for longer than some had anticipated.

The Fed’s 64-year-old Evans has consistently been one of the Fed’s policy doves, advocating lower interest rates and more accommodation. He will step down from his post early next year.

“Again, I still believe that our consensus, the median forecasts, will hit the peak interest rate by March – assuming there are no further adverse shocks. And as things get better, maybe we could do less, but I think we’re heading towards that peak,” Evans said.

“That offers a way for employment, you know, to stabilize in something that’s not yet a recession, but there could be shocks, there could be other difficulties,” he continued.

“God knows, every time I thought supply chains were going to improve, that we were going to increase car production and lower used car prices and house building, and all of that, something happened. So, cautiously optimistic.”

— CNBC’s Jeff Cox contributed to this report.