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Fed's Evans: Funds rate below 1% appropriate in 2016

A federal funds rate below 1 percent could be appropriate at the end of next year, a top Federal Reserve official said Friday.

In prepared remarks, Chicago Fed President Charles Evans noted that he favors a later liftoff from near-zero interest rates than other voters on the Federal Open Market Committee. Like some of his colleagues, he continued to stress that the pace of future rate increases is more important than the timing of the first one.

"While I favor a somewhat later lift off than many of my colleagues, the precise timing for first increase in the federal funds rate is less important to me than the path the funds rate will follow over the entire policy normalization process," Evans said in comments delivered to the CFA Society Milwaukee.

Charles Evans, president of Federal Reserve Bank of Chicago.
Melody Hahm | CNBC
Charles Evans, president of Federal Reserve Bank of Chicago.

Most voting members of the Fed's policy-making committee have acknowledged that the economy is strong enough to start raising rates soon. Markets have zeroed in on any indication of when the first hike will come.

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Evans contended that he wants to see signs that inflation will rise before supporting an interest rate hike. Evans added that headwinds against inflation likely will not ease until the middle of next year.

After it kept rates unchanged at its September meeting, the FOMC noted that a global slowdown could put more short-term pressure on inflation. The Fed has a policy meeting later this month and one in December.

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