Chicago Federal Reserve President Charles Evans reiterated Monday that the fight against inflation is the Fed’s most vital mission — even when that effort causes a significant rise in US unemployment.
Evans argued that any uptick in unemployment could be a painful but mandatory side effect because the Fed goals to lower prices by tightening monetary policy. The central bank has hiked its benchmark rate of interest by three-quarters of a percentage point at three straight meetings.
“Ultimately, inflation is crucial thing to get under control. That’s job one,” Evans said during a Monday appearance on CNBC’s “Squawk On The Street.” “Price stability sets the stage for stronger growth in the long run.”
“If unemployment goes up in any respect, that’s unlucky. If it goes up so much, that’s really very difficult,” Evans added. “But price stability makes the long run higher.”
The Chicago Fed president’s remarks were the most recent indication that policymakers aren’t backing off their hawkish approach to inflation. That’s despite mounting fears amongst investors that the Fed’s rate hikes will go too far and tip the US economy right into a lengthy recession.
Evans is a non-voting member of the rate-making Federal Open Market Committee. He is anticipated to exit that role in 2023.
Last week, the September jobs report showed the US labor market added 263,000 jobs in September. The national unemployment sank to a five-decade low of just 3.5% — a knowledge point widely taken as a sign that the Fed will proceed to sharply hike rates.
Investors are currently pricing in a 78.4% probability that the Fed will enact one more three-quarter-point hike at its next meeting in November, with only a 21.6% probability of a more modest half-point hike, in keeping with CME Group data.
Fed Chair Jerome Powell has warned of “some pain” for US households.Getty Images
While Fed Chair Jerome Powell previously warned that rate hikes would lead to “some pain” for US households in the shape of layoffs, the central bank’s current projection calls for the median unemployment rate will rise no higher than 4.4% through 2025.
Meanwhile, ex-Treasury Secretary Larry Summers, a distinguished Fed critic, asserted last week that unemployment will likely must hit 6% for the Fed’s policy stance to properly address inflation.