In sign of more hawkish Fed, Evans nods to three rate hikes

CHICAGO Chicago Federal Reserve President Charles Evans said on Friday the central bank could raise interest rates three times this year, faster than he had expected just a few months ago and in line with the majority of his colleagues.

The comments from Evans, a voting member of the Fed’s policy committee this year, reinforced the view that the Fed could step up the pace of its rate hiking campaign if the incoming Trump administration unleashed a fiscal stimulus.

Evans has been an outspoken proponent of low-interest rate policy for several years.

“I still think two (Fed rate hikes) is not an unreasonable expectation,” Evans told reporters in Chicago, adding that if the economic data comes in stronger than expected, “three is not going to be implausible.”

Two other U.S. policymakers, Cleveland Fed President Loretta Mester and Richmond Fed President Jeffrey Lacker, said Friday they would support even faster rate hikes.

“I’ve been … seeing a little more strength in the economy,” Cleveland Fed’s Mester told Fox Business Network, adding that more than three rate hikes this year is “probably” appropriate.

But Dallas Fed President Robert Kaplan said he supported a gradual and patient path for hikes, arguing it was too early to know whether Trump policies would boost economic growth.

Kaplan and Evans were in Chicago for an economics conference.

The Fed raised interest rates last month by a quarter of a point and policymakers signaled they expect to raise rates three more times in 2017.

Minutes from that meeting showed policymakers might signal an even more aggressive path of rate increases if inflationary pressures rise.

Incoming President Donald Trump has promised to double America’s pace of economic growth and “rebuild” the country’s infrastructure, and about half of the Fed’s 17 policymakers factored a fiscal stimulus into their economic forecasts, according to the minutes.

Evans said he was among the policymakers including fiscal stimulus in his forecasts, while Kaplan said he had yet to incorporate expectations of future economic policies.

“I want to be judicious about that,” Kaplan told reporters in Chicago, saying he does not want to “prejudge what is going to be positive or what is going to be negative.”

Lacker said in a speech the Fed “may need to increase more briskly than markets appear to expect.”

Prices for interest rate futures contracts suggest investors are betting on two or three rate hikes this year.

(Reporting by Ann Saphir and Jason Lange in Chicago and Lindsay Dunsmuir in Washington; Editing by Chizu Nomiyama and Chris Reese)