(The Center Square) – The president of the Chicago Federal Reserve said interest rate hikes in the future could increase unemployment.
During an Illinois Chamber of Commerce event in Chicago on Thursday, Federal Reserve Bank of Chicago President Charles Evans said the economy is stressed with “very high” inflation and an acute labor shortage. He said workers have different attitudes these days, especially after the pandemic.
“‘I’m not interested in overtime.’ Overtime is important,” Evans said in a conversation with Chamber President and CEO Todd Maisch. “‘I’m not interested in working the weekend shift.’ Well the weekend shift is important, especially when demand is so high, goods demand is high, production is at capacity, and so those are the shortages.”
To ease the economic pressure, Evans said they plan restrictive policies. He said projections from participants spell out expectations for the rest of the year.
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Federal Reserve Bank of Chicago President Charles Evans discusses the economy at an Illinois Chamber of Commerce event Thursday.
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Federal Reserve Bank of Chicago President Charles Evans discusses the economy at an Illinois Chamber of Commerce event Thursday.
“They’re looking for 125 basis points of increase,” Evans said. “So, in two meetings how do you do 125 basis points of increase? Well, you can sort of make that choice yourself, right?”
Fed Fund Rates this week are 3.25. A month ago, they were 2.5. A year ago, they were 0.25 percent. Evans compared that to nearly thirty years ago.
“The fed in 12 months increased the interest rate by 300 basis points and it was referred to as the biggest bloodbath in the bond market of all time. That was in 1994, ‘95,” Evans said. “We have just done 300 basis points in seven months.”
As more interest rate hikes come, Evans sees a hiring slowdown ahead.
“We’re tightening monetary policy,” Evans said. “I suspect that the unemployment rate is going to begin to creep up as the effect of higher interest rates work their way into the mortgage market and other credit activities.”
Evans said the fundamentals of the economy are strong and believes growth will go from negative or stagnant to slow expansion later this year.
