(Bloomberg) — The Federal Reserve should hold interest rates steady even though economic growth is coming in a bit faster than expected, Philadelphia Reserve Bank President Patrick Harker said.
(Bloomberg) — The Federal Reserve should hold interest rates steady even though economic growth is coming in a bit faster than expected, Philadelphia Reserve Bank President Patrick Harker said.
“We are at the point where we can hold rates where they are,” he said in speech to be delivered to Chartered Financial Analyst Society on Thursday. “So far, economic and financial conditions are evolving roughly as I expected, though I am keeping a close eye on the latest data, which have come in a tad stronger than my baseline forecast.”
He singled out the reported strength of consumer spending, describing it as “a bit of a head-scratcher.” While his contacts in retail report that consumers have turned more cautious, the data from the government showed that households have not been shy about spending, he said.
US retail sales increased in September by more than forecast in a broad advance that suggests durable household demand as the third quarter drew to a close. The value of retail purchases, unadjusted for inflation, increased 0.7% after an upwardly revised 0.8% gain in August, Commerce Department data showed.
Harker went through a variety of risks to the economic outlook, from the resumption of student-loan payments and difficulties in commercial real estate to the rise in bond yields and conflict in the Middle East.
“Taking this all together, the picture painted is one that, I believe, shows that allowing the policy rate to remain steady is the prudent position,” he said. “A resolute, but patient, stance of monetary policy will allow us to achieve the soft landing that we all wish for our economy.”
The Philadelphia Fed chief spoke after Fed Chair Jerome Powell suggested the US central bank is inclined to hold interest rates steady again at its next meeting while leaving open the possibility of a future hike if policymakers see further signs of resilient economic growth.
In a question-and-answer session after his speech, Harker said he wanted to “triple down” on the idea that interest rates are going to “stay high for a while” to help get inflation down to the Fed’s 2% target.
“We’re getting there — we’re not there yet,” Harker said.
(Updates with comment from Harker in penultimate paragraph.)
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