Fed's Harker sees two US rate hikes this year
[NEW YORK] Philadelphia Federal Reserve Bank President Patrick Harker on Wednesday said he still thinks just two interest-rate hikes this year is "likely appropriate," but signaled he is open to more if needed.
"Based on the relatively strong economy, but the continued stubbornness of inflation, I've penciled in two hikes for 2018," Mr Harker said in remarks prepared for delivery at Saint Louis University in St. Louis, Missouri. "I use pencil because the data can change, and sometimes they don't accurately point to future events." The Fed is widely expected to raise interest rates next month, the first of what many at the Fed believe should be three rate hikes this year. A recent strengthening in inflation data have helped convince many in financial markets that the Fed will need at least three rate hikes in 2018 to prevent the economy from overheating.
In his prepared remarks, Mr Harker made no mention of the recent inflation data, nor of the tax cuts that some view as fueling faster price rises.
Sticking closely to a view he laid out earlier this year, Mr Harker said he expects the US economy to grow 2.5 per cent this year before slowing to 2-per cent growth next year and to below 2 per cent in 2020.
Unemployment, he forecast, will fall from 4.1 per cent now to 3.6 per cent by the middle of next year before rising back up a few tenths of a percentage point, while job growth will remain strong.
And inflation, while still below the Fed's 2-per cent goal, should meet or exceed that objective by the end of 2019, he forecast.
"The Fed's mantra is data dependent, and for now, the data continue to tell me two (rate hikes) is the likely appropriate path," said Mr Harker, who does not have a vote on the Fed's policy-setting committee this year but who takes part in the panel's regular meetings.
REUTERS
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