Fed should not be in a hurry to raise rates: Evans

Charles Evans
Andrew Harrer | Bloomberg | Getty Images
Charles Evans

The U.S. economy is likely to continue to grow fast enough to generate continued job growth, but the outlook for inflation is "more worrisome," a top Federal Reserve official said on Wednesday.

"I don't think we should be in a hurry to raise rates," said Charles Evans, president of the Chicago Federal Reserve Bank, noting inflation has been running below the Fed's target for the last six years and is unlikely to reach that target for another three to four years.

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"Our inflation has been very low and I'd like to get that up," he said at a conference at the bank's headquarters.

Evans, a voter this year on the Fed's policy-setting panel, is among the most dovish U.S. central bank policy makers, worried more about the threat of too-high unemployment than too-high inflation.

With solid job gains bringing down the unemployment rate faster than expected, to 5.8 percent in November, most of his colleagues expect to start raising borrowing costs this year, many in about six months.

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That's despite the expectation that even by then inflation will not show much sign of rising.

Evans is only one of two Fed officials who have advocated that the Fed should delay raising rates until 2016 so as to give inflation a faster boost back to 2 percent.

Still, on Wednesday he suggested he could be swayed to support a 2015 hike in interest rates, either by economic data that comes in stronger than he currently expects, or by the understanding that the rate hikes would be very, very gradual.

"It is a tradeoff as to whether or not we delay for quite a long time before the first liftoff, or liftoff begins a little bit earlier than maybe I would think, but with a shallow enough path of increases so that the overall path still remains adequately accommodative to have confidence that we are going to achieve our inflation objective of 2 (percent) within some reasonable period of time," Evans told reporters after the conference.

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"Yeah, that could certainly be a plausible way to approach it: I think I'll be assessing all of those options when they are presented."

Still, he said, the risks of raising rates too soon outweigh the risks of raising them too late.