By Howard Schneider
CHARLOTTESVILLE, Va. (Reuters) – Interest rates that move too high could have a “nonlinear” impact on the economy as businesses become more pessimistic about the future, Chicago Fed President Charles Evans said on Wednesday, mapping out a case for caution in the central bank’s battle against high inflation.
The Fed currently projects its target federal funds rate will rise to 4.6% next year, and Evans said that “if we have to increase the path of the fund rate much more … it really does begin to weigh on the economy.”
“I worry that it’s sort of a nonlinear kind of impact … with businesses becoming very pessimistic and changing their strategies in a sort of notable way,” Evans said in remarks to reporters after an event at the University of Virginia.
(Reporting by Howard Schneider; Editing by Sandra Maler)
