Interest Rate Watch

Overly weak inflation and a lack of evidence suggesting price
pressures are about to heat up means the Fed shouldn’t raise interest
rates this year, Federal Reserve Bank of Chicago President Charles Evans said in a speech Wednesday.

“I think economic conditions are likely to evolve in a way such that
it will be appropriate to hold off on raising short-term rates until
2016,” Mr. Evans said. While the economy is growing and adding jobs at a
very healthy clip, inflation remains well under the 2% level targeted
by the Fed, and that argues for caution, he said.

Mr. Evans’ comments came from the text of a speech prepared for
delivery in London. The official is a voting member of the rate-setting Federal Open Market Committee.
The FOMC met last week in a gathering that continued to prepare the way
for an increase in what are now near-zero short-term rates. Most
central bankers support such a move this year, believing that growth is
likely to continue and that inflation, currently weighed down by
temporary factors like a sharp drop in oil, will rise back to the
desired level over time.

While a number of Fed officials share Mr. Evans’s worry about
inflation, most officials appear to agree the door to rate rises comes
with the Fed’s mid-June policy meeting. In a speech Monday evening, San Francisco Fed President John Williams, also an FOMC voter, said, “I think that by midyear it will be the time to have a discussion about starting to raise rates.”

(via wsj)