Chicago Federal Reserve President Charles Evans said on Wednesday the dollar's recent appreciation would weigh on inflation by lowering import prices but that this would be short-lived.
"To the extent that whatever movements in the dollar take place and then there’s some level of stability, that change in import prices unwind," Evans, an advocate for restraint in raising U.S. interest rates, said.
"It is transitory and our normal U.S. monetary influences on inflation ought to become more important at that point."
Evans was speaking in London at an conference being hosted by the Official Monetary and Financial Institutions Forum.
As a partly offsetting factor to the dollar's strength, Evans cited lower energy costs, which he sees benefiting consumers and some businesses.
"The dollar has been stronger... (and) it will be a challenge for some but energy prices are having beneficial effects for consumers and many businesses," he said.
The dollar index hit a 12-year high earlier this month against a basket of major currencies but has lost some ground since the Fed downgraded its forecasts for growth, inflation and interest rates last week.
No compelling reason to hike rates
During his speech, Evans said Fed policymakers should be "quite confident" that inflation is headed back to the central bank's 2 percent target before raising interest rates, urging a delay in rate hikes until the first half of next year.
To feel comfortable about raising rates, Evans said he would need to see a rise in core inflation above the current level of 1.3 percent, an increase in wage growth to a range of 3 to 4 percent annually, and a rise in inflation expectations.
Most of Evans's colleagues on the policy-setting committee expect the Fed to start raising rates this year and to continue raising them about a quarter of a percentage point every other meeting.
But Evans said most market participants expect the Fed to move even more slowly. His remarks were accompanied by a graph of market expectations that suggest traders agree with the rate hike views of the Fed's two most dovish policymakers, of which he is one.
"It would be very surprising if inflation did not begin to pick up to 2 percent, I share the optimism of so many of my colleagues that it will pick up but I just don't have the same confidence in the time profile of this, " Evans said.