Harker says he is in favor of the Fed maintaining interest rates and does not foresee cuts in the short term

Philadelphia Federal Reserve President Patrick Harker said Wednesday that the central bank’s recent decision to keep rates unchanged was the right choice and reiterated that now is the time for the Fed to take stock of its aggressive actions before deciding what comes next in monetary policy.

Harker, noting that he was one of the first to say before the last meeting that no rate increase was necessary, said that maintaining current monetary policy settings “will allow us to make more thoughtful and informed decisions on interest rates from now on.” decisions which, I would add, may be made one way or another, depending on what the data tells us.”

Harker, who has voting rights on the Federal Open Market Committee (FOMC), which sets monetary policy, made his comments in a speech prepared for Northwestern University’s Transportation Center.

These were his first public comments since the Fed held its key rate target steady at 5.25%-5.5% last week for a second consecutive meeting. Officials have left the door open for further hikes, but easing inflation pressures have led many investors to believe the Fed has already ended the tightening. There is even speculation that the Fed may cut rates next year.

In his speech, Harker warned market participants not to overdo it. “A reduction in interest rates is not likely to occur in the near term,” he said, adding that he takes “the position that rates will have to remain higher for a longer period” to help the Fed fulfill its mission to reduce interest rates and inflation.

Harker presented a very positive outlook in his comments. While he expects growth to slow, he doesn’t see the economy heading into recession. He believes inflation will slow to 3% next year and then return to the Fed’s 2% target.

As for employment, Harker expects the unemployment rate, which stood at 3.9% in October, to rise to 4.5% next year, before eventually returning to 4%.

Harker said “confident” consumers could likely help the Fed achieve its goal of a soft landing for the economy. But he added that with heavy spending driving strong recent growth, “time will tell whether the (consumer) has exhausted their pandemic-era savings” and will need to start moderating spending levels.

Source: Terra

Rose

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