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Evans favors later Fed hike, sees 2.5% 2016 growth

A top Federal Reserve official said Tuesday that he favors a later liftoff from near-zero interest rates and places more importance on the pace of increases than the timing of the first hike.

"Should we raise rates or not? I admit to some nervousness about our upcoming decision. Before raising rates, I would prefer to have more confidence than I do today that inflation is indeed beginning to head higher," said Chicago Fed President Charles Evans in prepared remarks at Michigan State University.

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

Evans noted that he sees a gradual path of rate normalization. He added that a federal funds rate below 1 percent could be appropriate at the end of 2016, and he sees the U.S. economy growing about 2.5 percent next year.

Evans has taken a more dovish outlook on a potential December rate hike than his colleagues on the Fed's policy-making committee. Markets are pricing a 79 percent chance of a rate hike this month, according to the CME Group's FedWatch.

Evans called U.S. job growth "solid," but said he was not confident about inflation moving toward the Fed's 2 percent target. Headwinds on inflation could persist into next year, he added.

Answering questions after the remarks, Evans said the Fed should use the December meeting to spell out the gradual pace of rate hikes.

The Fed's policy-making committee meets on Dec. 15 and 16.

Reuters contributed to this report.