"There's obviously more volatility in financial markets at the moment, how things will settle out is still a little unsure," he told reporters when asked about China's stock rout and yuan devaluation and their possible impact on the Fed's future path of interest rate hikes.
"I would expect that because the U.S. economic fundamentals are still pretty good, that would be the important factor for our forecasts going forward but...we are going to be clearly monitoring the global situation," Evans said.
The Chicago Fed president pointed to last September when the Fed delayed a rate hike to take time to analyze the impact of foreign developments on the U.S. economy.
After September, their impact "sort of moderated and we will have to see how things play out from here," Evans said.
While he would not comment directly on a possible regional currency war sparked by China allowing the biggest fall in the yuan in five months on Thursday, he noted such moves would hit U.S. exports.
"Our exposure to any of these individual countries is not so large that it should have an outsized effect, but if it were to happen in a big way and among more countries those start to add up into something even worse," he said.
Evans added that for this reason, the Fed should pursue a gradual path of rate increases and that he expects the Fed's benchmark interest rate in the vicinity of one percent at the end of this year.
He also said it would be mid-year before the Fed would be able to gauge if inflation, which has remained stubbornly low, is finally moving towards the central bank's 2-percent target rate.
(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)
By Lindsay Dunsmuir
