U.S. officials should hold interest rates near zero until mid-2016 given increased uncertainty surrounding the domestic economy and risks abroad, said Federal Reserve Bank of Chicago President Charles Evans.
“I still have the first funds rate increase not taking place until 2016,” he told reporters in Chicago Thursday. “It’s actually sort of the middle of 2016 based upon the slight markdown in our outlook, and the inflation data not being as strong as I might have liked.”
Financial markets have seesawed since Sunday, when Greek voters rejected austerity measures in return for more creditor aid, increasing the risk the country will be forced out of the euro area. Fed officials at their meeting last month saw Greece as a potential risk to the U.S. outlook.
While 15 of the 17 members of the policy-setting Federal Open Market Committee said at their June 16-17 meeting they thought it would be appropriate to begin raising rates this year, “what worries me is that some of the risks that we might be facing -- with Europe, with China, with emerging markets -- we’re not quite as close to that as a lot of people think,” Evans said.
In China, sharp declines in the Shanghai Composite Index since mid-June have raised questions about the country’s growth trajectory and the effects that slower growth and financial market volatility could have on commodities, Evans said.
“We’re looking for stabilization in commodity prices, oil prices, and the inflation data,” he said. “So anything that sort of adds more uncertainty to the fact that, well, I’m not quite sure if things have stabilized, or there could be more volatility, makes things more challenging.”