President of the Chicago Federal Reserve Bank, Charles Evans, said on Tuesday that the Fed might lift its policy target range to 2.25 percent to 2.5 percent by the end of the year and then assess the economy, but that if inflation remains strong, the Fed will likely need to raise rates even higher.
“I mean, that’s my expectation,” Evans said at the Economic Club of New York, “probably we’re heading beyond neutral.” The majority of Fed policymakers believe that neutral is between 2.25 and 2.5 percent.
Evans cited some “promising” developments in the most recent U.S. inflation report, which indicated that consumer prices grew 8.5 percent in March, but that some goods inflation, like that for used vehicles, slowed. If this trend continues, it may be able to help lower overall inflation.
However, he cautioned, the statistics might also go the other way, with Russia’s invasion of Ukraine and the COVID-19 lockdowns in Shanghai adding to the supply chain issues that have been driving up inflation.
“It would be a cause for considerable concern if inflation began to re-accelerate for some reason,” Evans added.
The Fed meets again in May, and it is largely expected to raise rates by a half percentage point then and again in June, before settling into quarter-point raises for the remainder of the year, bringing rates to Evans’ estimated neutral range by December.