Fed's Evans: Why rate hikes should wait until 2016

Chicago Federal Reserve President Charles Evans said Thursday the central bank should push any interest rate hike into next year, despite what he expects to be a rebound in the economy in the second quarter and the rest of 2015.

"There are uncertainty reasons to sort of make you say, 'Why should you be in a rush to do this,'" he told CNBC's "Squawk Box" in an interview.

"Accommodation is helping the economy move up," he argued. "And if inflation were to pick up more strongly than I'm expecting, we know how to deal with that, we can increase rates."

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The initial look at U.S. economy in the first quarter—out at the end of April—already signaled weak growth. That slow growth is now expected to be revised even lower based on recent sluggish data, when revised figures are released later this month.

"We kind of think that was transitory, in part because the dollar has been high, inventory accumulation was high, [the] consumer was weaker. But we think things are going to improve," said Evans, among the most dovish voting members on the central bank's policy committee.

He said he's looking forward to a stronger second quarter that's "more consistent with the stronger growth outlook that I and so many other people have of like 2.5 percent to 3 percent this year."

Investors get a major piece of the puzzle for the second quarter when the government releases the closely watched April employment report. Following Wednesday's worse-than-expected ADP private jobs numbers for last month and a lower-than-expected weekly jobless claims number Thursday, economists expect Friday's Labor Department report to show job growth of 224,000 for April, compared with the meager 126,000 nonfarm payrolls added in March.

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Rising bond yields served as a headwind for stocks Wednesday, with the 10-year yield trading at levels not seen in months—over 2.27 percent early Thursday before pulling back.

Asked to explain the recent spike in yields, Evans said, "Investors are probably looking at Europe and wondering, 'Well maybe things are better off.' And they're trying to see through what the ECB is going to do."

The European Central Bank is currently engaged in a Fed-style quantitative easing bond purchase program. "I'm confident that the ECB is going to continue with their choose path for quite some time," he said.

Another knock on stocks Wednesday was Fed Chair Janet Yellen saying market valuations are "quite high."

Evans defended Yellen's decision to talk about stocks. "I think it's incumbent on us to talk about financial stability [and] financial instability risk."

"In that context, it's quite natural that policymakers and the chair of the Federal Reserve [are] going to make some comments," he said—adding he agrees with Yellen. "The stock market is high, there's no doubt about it."

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