Chicago Fed's Evans Goes From Hawkish To Dovish And Back To Hawkish Again In Under 2 Weeks

Just one week ago, when the US dollar was surging when one after another Fed president were making hawkish statements (who can forget Bullard's forecast that a rate hike may occur as soon as April), one of the speeches which surprised the market the most, was that by Chicago Fed's permadove Chuck Evans, who on March 22 said that the Federal Reserve is on track for "gentle, gradual" rate hikes unless economic data comes in a lot stronger than expected or inflation picks up faster than anticipated, a top Fed official said on Tuesday.

"My projection would have two more this year on the basis of the outlook," Chicago Fed President Charles Evans told reporters after his talk to the City Club of Chicago. "I couldn't tell you which meeting that would be without having a firmer idea of what the data are doing."

"Fundamentals are good for the economy," he said during his speech. He noted, however, that past recoveries saw GDP growth of 3.5 percent.

"Currently, given my assessment, two rate increases is not at all unreasonable," Evans said after his speech. "My projection would have two more this year on the basis of the outlook."

And then, everything mysteriously changed less than two weeks later, when in the aftermath of Yellen's superdovish speech, Evans talked back all of his hawkish commentary: cited by Reuters, Evans said that the Federal Reserve "should have more clarity by the end of the summer whether recent strength in U.S. inflation data is a lasting reality or merely a temporary blip due to winter-related irregularities in the surveys, a top Fed official said on Wednesday."

"If we see the monthly numbers continue to come in more strongly and they begin to pile up I think you'd have to take that seriously. If it's a residual seasonalities story we ought to see it waning at some point," said Chicago Fed President Charles Evans.

Compare the above headline to this one:

But wait, it's not over, because as we draft this, Evans is once again talking live, and making the following statements, which suggest the hawkish Evans from March 18 may be back:

  • "My assessment of appropriate monetary policy is that given the economy and what we’re looking at, it would be two rate hikes this year,” says Chicago Fed President Charles Evans.
  • "Any improvement in the outlook would give rise to a stronger funds rate path"
  • "I guess I would sort of say one in the middle of the year, one at the end of the year"
  • Fed move doesn’t have to come at an FOMC meeting when Chair Janet Yellen is holding a press conference, "but my goodness the chair does a good job explaining" our decision

Yes, such a good job even Liesman is asking her if the Fed has lost all credibility.

As a reminder, the Fed Funds futures now imply a negligible chance of a June rate hikes, with at most one rate hike by the end of the year, so Evans saying 2 hikes means hawkishness is back.

Markets? Confused.