LD
Philadelphia Federal Reserve President Patrick Harker thinks the U.S. central bank is likely done raising interest rates in the wake of ongoing disinflation, he said on Friday.
“Absent a stark turn in what I see in the data and hear from contacts,” Harker said in a prepared speech for the Delaware State Chamber of Commerce, “I believe that we are at the point where we can hold rates where they are.”
The Fed has jacked up its policy rate 11 times since March 2022 to a target range of 5.25%-5.50%. The policy-setting Federal Open Market Committee decided in September to keep rates steady as inflation pressures softened.
“It will take some time for the full impact of the higher rates to be felt,” Harker, a voting member this year on the FOMC, said. “Holding rates steady will let monetary policy do its work. I am sure policy rates are restrictive, and as long they remain so, we will steadily press down on inflation and bring markets into a better balance.”
On the disinflation front, Harker sees inflation falling to below 3% in 2023 and to 2%, the Fed’s target, after that. He expects growth to persist through end-year, before pulling back modestly next year; a recession is not baked into his forecast.
His remarks echo what other officials have said in recent days with respect to a pause in rate increase. Boston Fed President Susan M. Collins, for instance, contended the Fed is “likely close to the peak of this tightening cycle,” as the risk of inflation remaining persistently high has become more closely balanced with the risk of slowing economic activity more than needed to achieve price stability.