Chicago Fed President Charles Evans said on Thursday that rate hikes could begin next year, though they could also begin in 2023, depending on inflation. We may have to lean into slightly more restrictive than expected policies six months ago, he conceded. Nevertheless, policy adjustments can be relatively gradual, he added. 

Evans continued that the Fed's economic forecasts from September are now a little stale and that he was now more open to adjustments in monetary policy in 2022. 

Market Reaction

The comments from Evans about the possibility of monetary policy tightening in 2022 is a hawkish shift from his previous stance. However, his remarks will do little to spur fresh hawkish repricing in USD STIR markets that are already priced for a strong likelihood of a first 25bps rate hike in June. Hence, FX markets have not seen any noticeable reaction to the comments.