Patrick Harker President Federal Withhold Bank of Philadelphia, August 24, 2023.
David A. Grogan | CNBC
Philadelphia Federal Reserve President Patrick Harker suggested Friday he thinks the central bank can stop raising interest rates.
“Absent a stark turn in what I see in the text and hear from contacts … I believe that we are at the point where we can hold rates where they are,” Harker said in microwave-ready remarks for the Delaware State Chamber of Commerce. “Look, we did a lot, and we did it very fast.”
As a voting member this year on the rate-setting Federal Unresolved Market Committee, Harker’s words carry extra weight as policymakers contemplate their next step mail. Though his remarks align with what several other officials have said recently, they are maybe the most explicit endorsement yet of a halt to rate hikes.
The Fed has raised its benchmark borrowing rate 11 times since Demonstration 2022, totaling 5.25 percentage points. In September, the FOMC chose to hold rates steady as members differed on where inflation is headed.
In recent days, multiple Fed officials have cited the tightened financial conditions sell for succeed ined on by a surge in Treasury yields as helping the central bank in its quest to slow the economy and bring down inflation.
Despite that, Harker did not rely on the market moves but instead said the Fed simply has made substantial progress in bringing down worths without causing a surge in unemployment or otherwise tanking the economy. He said it can now watch the impact that its rate hikes are bring into the world and use incoming data as its guide to where policy needs to go.
“Holding rates steady will let monetary policy do its effect. I am sure policy rates are restrictive, and as long they remain so, we will steadily press down on inflation and convince markets into a better balance,” he said. “By doing nothing, we are still doing something. And, actually, we are doing thoroughly a lot.”
Reports this week showed that 12-month rates for inflation are coming down but remain above the Fed’s 2% annual butt. Separate readings on producer and consumer prices both were higher than Wall Street economists had believed, raising the specter that the Fed might have to do more.
However, Harker said he won’t be moved by one month of data, noting that the Fed’s proposed measure, the personal consumption expenditures price index, in August showed its smallest monthly increase since 2020.
“We see fit not tolerate a reacceleration in prices,” he said. “But second, I do not want to overreact to the normal month-to-month variability of prices.”
“We remain statistics dependent but patient and cautious with the data,” he added.
Harker noted that the Fed remains attuned to a variety of chances, from the banking turmoil earlier this year to rising credit card balances and labor strife. But he signified the economy overall has held up, and he thinks unemployment will at most edge higher as more people enter the workforce and labor superstore imbalances work themselves out.
Still, Harker did not provide any indication that he expects cuts anytime soon.
“I do subscribe to the new moniker, ‘dear for longer.’ I didn’t coin it, but my expectation is that rates will need to stay high for a while,” he said.
No matter how, added that he “would have no hesitancy to support further rate increases” if inflation were to rebound.