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Post by thelivyjr »


"Fed signals bond-buying taper coming 'soon,' rate hike next year"

By Howard Schneider, Jonnelle Marte

SEPTEMBER 22, 2021

WASHINGTON (Reuters) -The Federal Reserve said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signaled interest rate increases may follow more quickly than expected as the U.S. central bank’s turn from pandemic crisis policies gains momentum.

The slight hawkish tilt was signaled in a new policy statement and economic projections that showed nine of 18 Fed officials ready to raise interest rates next year in response to inflation that the central bank now expects to run at 4.2% this year, more than double its 2% target rate.

A drawdown of the central bank’s $120 billion in monthly bond purchases could begin after the Nov. 2-3 policy meeting as long as U.S. job growth through September is “reasonably strong, Fed Chair Jerome Powell said in a news conference following the central bank’s latest two-day session.

The U.S. nonfarm payrolls report for September will be released in early October, the last such report before Fed policymakers gather again in November.

“It wouldn’t take a knockout or super-strong employment report,” to start the “taper” of the bond-buying program, with the process expected to wind down by the middle of next year, Powell said.

That timetable has taken on added significance.

The Fed wants its purchases of Treasuries and mortgage-backed securities to end before it starts lifting borrowing costs, and new projections showed officials poised for that to happen in 2022.

The Fed now projects inflation will run above its target for four consecutive years.

Even though the overshoot is slight, at 2.2% in 2022 and 2023 and 2.1% in 2024, it has begun to shift views among policymakers who have been divided over whether the biggest risk is the pandemic’s ongoing impact on the economy, marked by relatively high joblessness, or the threat of breakout inflation.

For the time being, the Fed still anticipates being able to spur employment while keeping a lid on inflation, which it views as the result of “transitory” forces that will ebb on their own.

Indeed, the interest rate increases are expected to proceed slowly, pushing the Fed’s benchmark overnight lending rate to 1% in 2023 and then to 1.8% in 2024 - still considered a loose monetary policy stance that will allow the unemployment rate to fall to its pre-pandemic level of around 3.5%.

Policymakers, however, downgraded their expectations for economic growth this year, with gross domestic product expected to grow 5.9% compared to the 7.0% projected in June, largely as a result of the new wave of coronavirus cases.

Overall, the Fed’s statement and projections are “probably a little bit more hawkish than many would have anticipated, basically acknowledging that should the economy continue to grow as we have seen, it would warrant a tapering to occur,” said Sam Stovall, chief investment strategist for CFRA Research in New York.

“You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

Powell told reporters financial conditions would remain accommodative even after the Fed stops its asset purchases and emphasized that the decision on the bond-buying program was separate from any actions regarding interest rates.

The Fed on Wednesday held its current target interest rate steady in a range of 0% to 0.25%.

U.S. stocks extended gains after the release of the statement before retreating later in the afternoon, with the S&P 500 index closing up about 1%.

U.S. Treasury yields see-sawed, with the yield on the benchmark U.S. 10-year note edging lower.


The Fed’s September policy statement had been widely expected to point to the coming end of the bond purchases it has been making to blunt the economic impact of the pandemic.

Fed officials said last December that they would continue purchasing bonds at the current pace until there was “substantial further progress” on the central bank’s goals for maximum employment and inflation.

The inflation benchmark has been cleared, Powell said on Wednesday, and the employment standard “all but met.”

But it was in their broader economic outlook that Fed policymakers made a less anticipated change.

Their outlook for inflation jumped 0.8 percentage point for 2021 and the expected end-of-year unemployment rate rose over policymakers’ previous forecast in June.

In turn, two officials brought forward into 2022 their projected timeline for slightly lifting the Fed’s benchmark overnight interest rate from the current level, enough to raise the median projection to 0.3% for next year.

The move to lower GDP growth expectations for 2021 reflected concerns that the coronavirus is weighing on the economy.

Projected growth for next year was increased from 3.3% to 3.8%, with spending merely shifted into future months when the virus is expected to recede.

“The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery,” the Fed said in its policy statement.

Reporting by Howard Schneider; Additional reporting by Jonnelle Marte and U.S. Finance and Markets Breaking News team; Editing by Paul Simao ... SKBN2GI0BQ
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Post by thelivyjr »


"Weekly jobless claims total 351,000, worse than expected"




* First-time jobless claims totaled 351,000 last week, an increase from 16,000 a week before and well ahead of the 320,000 Dow Jones estimate.

* Continuing claims increased by 181,000 to 2.84 million.

* The total receiving benefits under all programs fell sharply as enhanced federal programs wound down.

First-time filings for unemployment benefits jumped last week, hitting the highest level in a month, the Labor Department reported Thursday.

Initial claims for the week ended Sept. 18 on a seasonally adjusted basis totaled 351,000, an increase from the previous week’s upwardly revised 335,000 and well ahead of the 320,000 Dow Jones estimate.

The total was the highest since the week of Aug. 21.

Markets reacted little to the news, with stock market futures pointing to a strong opening while safe-haven government bonds saw yields rise, an indication that investors were selling fixed income as yields move opposite price.

The latest claims figures show that while the jobs market has come a long way since the early days of the pandemic, there’s still work to be done before it’s healed.

Continuing claims data, which runs a week behind, also increased, rising 181,000 to total more than 2.84 million.

The four-week moving average for initial claims, which irons out weekly volatility, is now at 335,750, which is actually a decrease of 750 from a week ago.

Just prior to the pandemic declaration, that total was around 215,000.

A year ago, it was at 869,000.

The four-week moving average for continuing claims fell 15,750 to just over 2.8 million.

That number was 1.73 million prior to the pandemic and 12.6 million a year ago.

As enhanced unemployment benefits related to the pandemic wind down, the total of those receiving benefits also is declining, dropping by 856,440 to 11.25 million.

The expiration is expected to cut benefits completely to about 7 million people, while 3 million others will lose the extra $300 a week on top of their regular compensation, according to Bank of America.

Two states accounted for the biggest share of the jump, according to unadjusted data.

California saw a surge of 24,221 filings, while Virginia jumped by 12,879. ... imate.html
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Post by thelivyjr »


"U.S. congressional Democrats report deal to pay for Biden spending plans"

By Richard Cowan, David Morgan

SEPTEMBER 23, 2021

WASHINGTON (Reuters) - The top two Democrats in the U.S. Congress on Thursday said they had reached a deal to pay for President Joe Biden’s sweeping social agenda, as the White House warned federal agencies to begin preparing for the possibility of a government shutdown.

Senate Majority Leader Chuck Schumer and House of Representatives Speaker Nancy Pelosi provided no details on how they would pay for Biden’s proposed $3.5 trillion social spending plan.

The party remains deeply divided about the bill, with moderates objecting to its size and progressives saying they won’t accept anything smaller.

Even as that intra-party fight is playing out, Congress faces a pair of critical fast-approaching deadlines.

Funding for federal agencies will run out on Oct. 1 if lawmakers don’t act, which would prompt a partial shutdown of the federal government.

The U.S. Treasury has also warned that unless Congress raises or temporarily lifts the nation’s borrowing limit it will run out of money to pay the government’s bills by mid-October, which could cause a historic default.

Republicans, who see the debt ceiling debate as a way to derail or scale back Biden’s agenda, have vowed to oppose the debt ceiling and government funding measure that passed the House of Representatives on Tuesday.

The White House characterized its warning to federal agencies to prepare for a possible government shutdown as a formality.

“It’s just a reminder,” White House press secretary Jen Psaki told reporters.

“We’re seven days out, and we need to be prepared, of course, in any event of any contingency.”

Still, even with those risks approaching, Pelosi and Schumer sought to present Thursday’s deal as a victory the morning after Biden met with congressional Democrats to try to hash out an agreement on the size of the package.

“We know that we can cover the proposals that the president has put forth,” Pelosi said at a news conference.

“This is a giant step forward.”

Neither she nor Schumer offered details about the agreement or the overall price of the legislative package.

Multiple members of the Democratic rank and file said they have not yet seen the framework.


Senate Finance Committee Chairman Ron Wyden said the framework was a bid to overcome differences between moderate and progressive Democrats, whose support is crucial to enacting Biden’s legislation without Republican votes.

Democrats’ razor-thin majorities leave them just three votes to spare in the House and none in the Senate if all Republicans vote against them.

“The moderates are right when they say you ought to pay for the areas you want to invest in,” Wyden told reporters.

“I also believe that the issue of paying for things has to bring in a new measure of fairness and everybody’s got to pay their fair share, and that’s what we’re working on.”

Democratic moderates and progressives have sparred over the scale of the president’s spending plan, as well as a $1 trillion bipartisan infrastructure bill the House is due to consider on Monday.

The framework announcement signals agreement between the chairs of the House and Senate tax-writing committees on a menu of options that could be used to pay for the emerging spending bill, according to a Senate Democratic aide.

The Senate next week plans to vote on a measure to suspend the $28.4 trillion debt ceiling and keep federal agencies operating after Sept. 30, the end of the fiscal year.

Reporting by Richard Cowan, David Morgan, Nandita Bose and Lisa Lambert; Editing by Andy Sullivan, Mark Porter and Howard Goller ... SKBN2GJ1D7
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Post by thelivyjr »


"U.S. household wealth rose to record $141.7 trillion in Q2, Fed says"

By Jonnelle Marte and Ann Saphir

September 23, 2021

Sept 23 (Reuters) - U.S. household wealth jumped to a new high of $141.7 trillion at the end of June, a report from the Federal Reserve showed on Thursday, boosted by stock market gains and a pandemic-induced real-estate boom.

Soaring equity markets fueled the increase in overall wealth, adding $3.5 trillion to household assets in the second quarter - a period in which the S&P 500 saw a total return of just over 8.5% after factoring in reinvested dividends.

Rising real estate values added around $1.2 trillion, according to the U.S. central bank's latest quarterly report on household, business and government financial accounts.

Overall U.S. household wealth rose by $5.9 trillion from the first quarter.

The amount held in household savings deposits fell to $10.6 trillion in the second quarter from $10.8 trillion in the first quarter.

Balances in checking accounts rose to $3.6 trillion from $3.3 trillion in the first quarter, the report showed.

The latest snapshot of U.S. household wealth and how it has grown over the coronavirus pandemic shows just how unique the downturn has proven to be.

With the help of unparalleled monetary and fiscal policy responses that fortified personal balance sheets and sent asset prices soaring, household wealth has rocketed by $31 trillion - 28% - since the first quarter of 2020, an unprecedented increase.

Much of the support offered to households, including enhanced unemployment benefits or mortgage forbearance, has either ended or will be expiring in the coming months, just as a resurgence in COVID-19 infections is hurting some vulnerable sectors and slowing job growth.

The report showed that household debt grew at an annualized rate of 7.9% in the second quarter, compared to 6.7% in the first quarter.

Non-financial business borrowing rose at a slower annualized rate of 1.4%, compared to 4.3% in the first quarter.

And government borrowing increased at an annualized rate of 9.6%, up from 9.0% the previous quarter.

Reporting by Jonnelle Marte and Ann Saphir; Editing by Andrea Ricci and Lisa Shumaker ... 021-09-23/
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Post by thelivyjr »


""Reasonably good" September jobs starts Fed taper. Is another dud coming?"

By Howard Schneider

September 23, 2021

WASHINGTON, Sept 23 (Reuters) - U.S. Federal Reserve Chair Jerome Powell has tied the initial wind down of the central bank's bondbuying program to "decent" job growth in September, but high frequency payroll data so far show the pandemic may still be holding back hiring.

Among them, a report this week from payroll management firm UKG showed shift work across a variety of industries, measured during the week when a federal jobs survey is conducted, "was effectively flat month over month" from August to September, said UKG vice president Dave Gilbertson.

"We will likely see one more month go by without the job creation acceleration that economists have been predicting," said Gilbertson, noting that job openings remain strong but "people remain unwilling to jump back into the market, whether that be due to family and childcare obligations, salary and benefit requirements, changing job paths, or the surging Delta variant.”

Powell said Wednesday the Fed intends to begin reducing its $120 billion in monthly bond purchases as soon as November, and, absent a significant change in the direction of the U.S. recovery, certainly by the end of the year.

Yet he did set a condition around the government report, to be released on Oct. 8, that will detail September job creation.

It will be the last official jobs report the Fed will receive before its November meeting, and while Powell said it needn't be "a knock-out, great, super-strong" report, it would need to be "reasonably good."

In normal times that would mean one thing.

Over the decade from 2010 to the start of the pandemic monthly job growth averaged 186,000.

For the pandemic era, with millions of jobs still missing, that probably sets the bar at several hundred thousand.

Average monthly job creation has averaged 487,000 since the Fed said in December it would need to see "substantial further progress" in the labor market before starting to reduce its bond purchases.

It would take around 365,000 new jobs in September for the United States to have regained half the payroll positions "missing" at the point the Fed adopted that language, a benchmark some officials have mentioned as their marker for "substantial" progress.

The Fed may be disappointed.

A recent J.P. Morgan analysis of alternative, higher frequency data projected firms will add 330,000 jobs in September.

Payroll data from Homebase shows a steady decline in employment at a sample of around 50,000 small businesses, many of them restaurants and other service sector firms most likely to feel the impact if consumers shy away from in-person activities again given the new surge of coronavirus cases.

An Oxford Economics recovery tracker fell for the week of Sept. 10, led by 2 a percentage point drop in its measures of employment.

The Fed acknowledged a fresh pandemic hit to the most beleaguered parts of the economy in the policy statement released Wednesday, and Powell amplified the message in his press conference.

"We have...a unique situation where by many measures the labor market is tight," with record job openings, rising wages and other conditions that would let the Fed start to turn away from pandemic support and begin reducing its monthly bond purchases, Powell said.

Policymakers, moreover, anticipated a surge of new jobs in the fall as schools reopened, unemployment benefits expired, and other changes "would come we’d get out of this strange world where there are lots of unemployed people and a high unemployment rate but a labor shortage."

Instead "Delta happened," Powell said, referring to the more virulent strain of the coronavirus, and employers added a disappointing 235,000 jobs in August.

There have been other dud job reports in recent months.

The number of jobs actually declined in December, and at the peak of the spring vaccine rollout the number of jobs created in April was a disappointing 269,000.

But September has now taken on added significance as the Fed looks ahead to its November policy meeting and a possible start to the bond taper.

"If the economy continues to progress broadly in line with expectations, then I think...we could easily move ahead at the next meeting," Powell said, "or not."

Reporting by Howard Schneider; Editing by Andrea Ricci ... 021-09-23/
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Post by thelivyjr »


"Two Fed policymakers say bar for taper met, nod to next debates"

By Ann Saphir, Howard Schneider

SEPTEMBER 24, 2021

(Reuters) -A pair of Federal Reserve policymakers on Friday said they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy, setting up for the next big Fed debates: when to raise interest rates and what to do with the Fed’s massive balance sheet.

In separate appearances, Cleveland Federal Reserve Bank President Loretta Mester and Kansas City Fed President Esther George both said that the economy had made “substantial further progress” toward the Fed’s maximum employment and 2% inflation goal.

That’s the bar the Fed has set for beginning to taper its current $120 billion in monthly asset purchases, aimed at pushing down longer-term interest rates.

The remarks came days after Fed Chair Powell said the economy is one “decent” monthly jobs report short of meeting that threshold, allowing the Fed to begin to reduce its monthly asset purchases by the Fed’s next meeting Nov. 2-3.

“I support starting to dial back our purchases in November and concluding them over the first half of next year,” Mester said during an event organized by the Ohio Bankers League.

“The rationale for continuing to add to our asset holdings each month has waned,” George told the American Enterprise Institute.

Both appearances took place online, underscoring the continued scourge of the coronavirus pandemic that plunged the economy into its sharpest and shortest recession last year and is still keeping labor and materials short of what’s needed to sate the rising demand for both as the economy recovers.

That’s led to inflation above the Fed’s 2% goal that policymakers like Mester and George worry could become persistent.


The comments from the two hawkish policymakers begin to unveil some contours of the debate that took place behind closed doors at this week’s Fed policy meeting.

More Fed policymakers are due to address the issue next week, including Chicago Fed President Charles Evans and Fed Governor Lael Brainard on Monday, who have had a more dovish stance on policy, as well as New York Fed President John Williams.

Fed policymakers do not believe the bar for raising the short-term policy rate has yet been met, but half - including Mester - believe it will have been by the end of next year.

Those conditions include that inflation is durably at the central bank’s 2% target and that maximum employment has been reached.

Mester said monetary policy will remain accommodative even after the Fed trims its bond buying because it will still be adding to the balance sheet.

George, for her part, flagged the complications the $8.5 trillion balance sheet poses for the path of interest rates.

The accommodation from those massive asset holdings “will persist even when tapering is complete,” George said.

Noting her longstanding worry that keeping interest rates near zero risks both inflation and financial instability, she said, “I don’t want to be lower any longer than we need to be.”

After the 2007 to 2009 financial crisis, the Fed waited a year between the end of its bond “taper” and the first increase of its policy interest rate.

It was two more years before the Fed began allowing the balance sheet - at the time about half its current size - to shrink.

The process may happen faster this time, with the taper not expected to end until the middle of next year and policymakers now pointing to a rate hike later that year.

Finding the right level for the policy rate given the continued stimulative effects of the balance sheet will be a challenge, George said.

“Where along the yield curve would we prefer the most policy space?” George said, conjecturing the Fed might want to keep longer-term rates low by keeping its balance sheet large, but counter that stimulus with a higher short-term policy rate.

That, however, might raise the risk of an inverted yield curve, she said, an argument for shrinking the balance sheet “or at least shifting toward one with shorter-maturity assets, with a lower neutral policy rate.”

“As the economy recovers from this pandemic shock, its path is likely to confound our assumptions about what a return to normal might look like,” George said.

“The same is true for the monetary policy normalization process."

"Both point to a long and difficult process ahead.”

Reporting by Ann Saphir, Jonnelle Marte and Howard Schneider; Editing by Chizu Nomiyama, Matthew Lewis and Andrea Ricci ... SL1N2QQ1I6
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Post by thelivyjr »


"Fed Chair Powell to warn Congress that inflation pressures could last longer than expected"




* Fed Chairman Jerome Powell cautioned that the causes of the recent rise in inflation may last longer than anticipated.

* The remarks are part of mandated testimony Powell must give to Congress regarding the Fed’s economic response to the Covid-19 pandemic.

Federal Reserve Chairman Jerome Powell, in remarks to be delivered Tuesday, cautioned Washington legislators that the causes of the recent rise in inflation may last longer than anticipated.

In a speech that he will deliver to the Senate banking committee, the central bank chair said economic growth has “continued to strengthen” but has been met with upward price pressures caused by supply chain bottlenecks and other factors.

“Inflation is elevated and will likely remain so in coming months before moderating,” Powell said.

“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors."

"These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.”

The remarks are part of mandated testimony Powell must give to Congress regarding the Fed’s economic response to the Covid-19 pandemic.

He will speak Wednesday to the House Financial Services Committee.

Following its meeting last week, the Fed indicated it soon will start pulling back on some of the stimulus it has provided during the crisis.

However, officials have stressed that the reduction of monthly asset purchases is not tantamount to looming interest rate hike.

“We at the Fed will do all we can to support the economy for as long as it takes to complete the recovery,” Powell said. ... ected.html
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"U.S. Senate Democrats brace for loss in showdown vote on debt ceiling"

By Richard Cowan, David Morgan

SEPTEMBER 27, 2021

WASHINGTON (Reuters) -The Democrats who control the U.S. Senate were bracing for a likely loss on Monday in a vote on a bill to fund the federal government and lift the nation’s debt ceiling, as President Joe Biden’s party fought over the details of his sweeping social agenda.

If Republicans carry out a threat to block the legislation, which has already passed the House of Representatives, to fund the U.S. government through Dec. 3 and suspend the nation’s borrowing limit until the end of 2022, that will leave Democrats just three days to find another way to keep the government operating beyond Thursday - when current funding expires.

Lawmakers also will have to figure out how to raise the debt ceiling to head off the risk of default, with independent analysts warning that the U.S. Treasury Department is likely to exhaust its borrowing authority fully sometime between Oct. 15 and Nov. 4.

Democrats are eager to avoid such drama as they try to project competence after four years of Republican Donald Trump’s chaotic presidency.

Senate Majority Leader Chuck Schumer has not said what his next move is if the Monday night vote fails, though Republicans have indicated they would vote for a funding extension if the language suspending the government’s $28.4 trillion debt limit were removed.

Republicans have said they want Democrats to lift the debt limit on their own, saying they do not support their upcoming spending plans.

Democrats point out that much of the nation’s new debt was incurred during Trump’s administration.

“We can’t give up on the idea that this should be done in a bipartisan way,” Democratic Senator Michael Bennet told Reuters.

“It would be too damaging to the country to have it be done in partisan terms.”


In the meantime, Democrats are at odds over two pillars of Biden’s domestic agenda: a $1 trillion infrastructure bill and a larger $3.5 trillion social spending package.

The rift risks derailing Biden’s presidency and the party’s hopes of keeping its congressional majorities in next year’s midterm elections.

Biden spent the weekend negotiating with lawmakers over the phone, according to administration officials.

The White House is trying to determine how much they will be able to spend and how to raise offsetting revenue, with an eye toward what can pass the Senate, which Democrats control only through Vice President Kamala Harris’ tie-breaking vote.

Biden told reporters that Democrats may not be able to agree on the details of the larger bill -- which party leaders have already said will likely shrink -- this week.

“It may not be by the end of the week, I hope it’s by the end of the week,” he told reporters.

The House was expected to take up the infrastructure bill on Monday.

But Speaker Nancy Pelosi delayed a vote on the legislation until Thursday to provide more time to broker an agreement on Biden’s more sweeping social plan.

She is due to preside over a party meeting on Monday evening.

The infrastructure bill, which moderates favor, would fund road, bridge, airport, school and other projects.

It passed the Senate last month with considerable Republican support.

But progressive Democrats have threatened to oppose the infrastructure measure unless moderates in both the House and Senate agree to the larger package, which Democrats intend to pass without Republican votes via a process known as budget reconciliation.

Moderate Democrats see the reconciliation bill’s initial $3.5 trillion price tag as too high.

Biden’s efforts to expand healthcare and education, reduce child poverty, and fight climate change hang in the balance.

Reporting by David Morgan and Richard Cowan, additional reporting by Susan Cornwell, Jarrett Renshaw and Susan Heavey; writing by Andy Sullivan; Editing by Scott Malone, Daniel Wallis, Dan Grebler and Jonathan Oatis ... SKBN2GN0V3
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Post by thelivyjr »


"Fed's highest priority is to get people back to work: Kashkari"

By Reuters Staff

SEPTEMBER 27, 2021

(Reuters) - The Federal Reserve’s “highest priority” is to make sure millions of Americans now out of a job can get back to work, Minneapolis Federal Reserve Bank President Neel Kashkari said in a speech taped Friday and released Monday.

“Putting Americans back to me that’s our highest priority,” Kashkari said at the Community Foundations Leading Change Fall Forum, adding that “of course” the Fed will pay close attention to inflation and keep that in check.

Recent high readings of inflation do not signal permanently higher inflation, he said: “We don’t want to overreact to short-term price movements.”

Reporting by Ann Saphir ... SS0N2O4009
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Post by thelivyjr »


"Fed's Evans sees 2.4% inflation in 2024, 'gentle incline' in rates"

By Reuters Staff

SEPTEMBER 27, 2021

Sept 27 (Reuters) - Chicago Federal Reserve Bank President Charles Evans on Monday said he expects inflation to rise to 2.4% by 2024 but interest rates to be only on a “gentle incline” upward, a view that contrasts with that of some other policymakers who believe a faster pace of rate hikes will be needed.

“We are trying to solidify strong, firm inflation expectations that allow for 2% over time as an average,” Evans told reporters on the sidelines of the National Association for Business Economics.

In his view, he said, “the brief period of higher inflation... is helpful for reinforcing inflation expectations.”

(Reporting by Ann Saphir; editing by Chizu Nomiyama) ... SS0N2LF02F
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