Philadelphia Fed President Patrick Harker repeated his view that the Fed has “probably done enough” on tightening policy and should keep interest rates at restrictive levels while it assesses the impact on the economy.
(Bloomberg) — Philadelphia Fed President Patrick Harker repeated his view that the Fed has “probably done enough” on tightening policy and should keep interest rates at restrictive levels while it assesses the impact on the economy.
“We are in a restrictive stance,” Harker, who votes in policy decisions this year, said during an interview with CNBC ahead of the Kansas City Fed’s annual economic policy symposium in Jackson Hole, Wyoming. “I’m in the camp of ‘let the restrictive stance work for a while, let’s just let this play out for a while, and that should bring inflation down’.”
Policymakers raised interest rates by a quarter point last month, bringing the target on their benchmark rate to a range of 5.25% to 5.5%. Officials have more economic data to review before their next meeting on Sept. 19-20, including a monthly jobs report and fresh readings on inflation.
Their economic projections released in June show the median official expected to raise rates at least once more this year. But investors largely expect the Fed to keep rates steady through year end, according to pricing in futures contracts.
Speaking earlier in an interview on Bloomberg Television, former St. Louis Fed President James Bullard said a pickup in economic activity this summer could delay plans for the Fed to wrap up interest-rate increases.
Bullard reiterated remarks he made earlier this week that recession fears have been overblown and stronger economic growth could require higher rates to keep battling inflation. He said Thursday it’s possible interest rates will need to remain elevated in the medium term to combat price pressures.
“This reacceleration could put upward pressure on inflation, stem the disinflation that we’re seeing and instead delay plans for the Fed to change policy,” he said.
Bullard, who resigned last month to become dean of the Mitchell E. Daniels, Jr. School of Business at Purdue University, was an influential voice at the Fed who called for aggressive interest-rate hikes to fight the recent inflation surge.
“I think the probabilities are that we are in a new regime that will be a higher interest-rate regime,” Bullard said. “Inflation is above target today. Core inflation is likely to be sticky and come down rather slowly.”
The former St. Louis Fed chief said if progress on inflation stalls, or if price pressures strengthen, “that would suggest a higher rate profile for the Fed than otherwise.”
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