Federal Reserve Bank of Philadelphia President Patrick Harker said the US central bank may be able to cease interest-rate increases, barring any surprises in the economy, though rates would need to stay at their current elevated levels for some time.
(Bloomberg) — Federal Reserve Bank of Philadelphia President Patrick Harker said the US central bank may be able to cease interest-rate increases, barring any surprises in the economy, though rates would need to stay at their current elevated levels for some time.
“Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work,” Harker, who holds a vote on policy decisions this year, said Tuesday in remarks prepared for an event organized by the Philadelphia Business Journal.
Speaking elsewhere on Tuesday, Richmond Fed President Thomas Barkin argued it was too soon to say whether another rate increase at the Fed’s next meeting in September would be appropriate.
“I’m leaning toward waiting until September to decide,” Barkin, who does not vote on policy decisions this year, said after an event at the Loudoun County Chamber of Commerce in Virginia. “We’ll get two labor reports, we’ll get two inflation reports, including one that’s coming Thursday. I don’t see any reason to pre-judge.”
The Fed in July raised its benchmark federal funds rate to a target range of 5.25% to 5.5%, the highest level in 22 years. Forecasters increasingly expect that the central bank may be finished with the historic campaign of rate hikes that began early last year. It next meets to discuss policy Sept. 19-20.
“Should we be at that point where we can hold steady, we will need to be there for a while,” Harker said in his speech. “I do not foresee any likely circumstance for an immediate easing of the policy rate.”
Speaking later Tuesday on Philadelphia’s WHYY public radio station, he added that “sometime probably next year, we’ll start to bring the interest rates down.”
Not all officials are unified behind the idea that the Fed could soon be done with rate hikes. Fed Governor Michelle Bowman on Monday reiterated her view that they may need to raise rates further in order to fully restore price stability.
The central bank will have more key economic data in hand before the September policy meeting, including another jobs report and a fresh reading on consumer prices due Thursday. Investors do not currently expect another rate hike this year, based on prices of futures contracts.
Barkin acknowledged the strength in recent economic data, saying that the labor market in particular has been “remarkably resilient.”
At the same time, “No one canceled the business cycle, so you can’t fully rule out a recession. It’s just a question of when,” he said. “To be sure, the Fed’s objective is not to cause a recession — it’s to reduce inflation.”
(Updates with more Harker comments in seventh paragraph.)
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