CHICAGO (Reuters) - A top Federal Reserve policymaker known for his dovish policy views made the case Thursday for waiting until the middle of next year to raise U.S. interest rates, citing global risks and a domestic economy that still needs plenty of support.
“Mid-2016 is where I envision the first liftoff,” Chicago Fed President Charles Evans told a handful of reporters at his bank’s headquarters in Chicago.
There would be a high hurdle to convince him to support an earlier rate hike, he said.
“I just don’t see why we should be in a hurry with all of the risks that we face. A little more time doesn’t hurt.”
For extensive highlights from the interview, please see
Evans is one of only two Fed policymakers, and the only one with a vote on the policy committee this year, who does not support an interest-rate hike in 2015. The Fed has kept interest rates near zero since December 2008.
The rest of Evans’ colleagues are debating whether one rate hike or two would be more appropriate, given the improvement in the labor market and their expectation that inflation will soon bottom and beginning rising back to the Fed’s 2-percent target.
Some, like San Francisco Fed President John Williams, believe that waiting too long will only mean that when the Fed does begin the process it will need to boost interest rates sharply to keep the economy from overheating.
“This argument that it could be earlier and shallower or later and steeper, why do you worry about that so much - I think that’s premised on the idea that overall it’s about time to start normalizing,” Evans said. “What worries me is that some of the risks we are facing – with Europe, with China, with emerging markets – we are not quite as close to that as people might think.”
Evans expects the U.S. economy to grow about 2.75 percent next year and 2.5 percent in 2017, pushing unemployment to a near-normal 5.1 percent by the end of next year.
Still, he said, he does not expect inflation to reach the Fed’s 2 percent target until 2018, if then. To support a rate hike, he said, he would like to see at least even odds that inflation will rise above 2 percent within two years.
Even so, he added, when the Fed does raise rates, “nobody will be surprised.”
Reporting by Ann Saphir; Editing by Chizu Nomiyama