Fed’s Harker expects no more rate hikes needed this year, in CNBC interview

By Michael S. Derby

NEW YORK (Reuters) -Federal Reserve Bank of Philadelphia President Patrick Harker doubts the U.S. central bank will need to raise interest rates again, and said in an interview with CNBC he’s not ready to predict when the Fed can start lowering rates.

“Right now I think that we’ve probably done enough” and it’s probably a good idea to hold steady for the rest of this year and see how that affects the economy, Harker said on Thursday.

“We are in a restrictive stance, do we have to keep going even more and more restrictive?” Harker asked. “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.”

Harker spoke to the television channel on the sidelines of the Kansas City Fed’s annual research conference in Jackson Hole, Wyoming. He was the first Fed official to weigh in ahead of a hotly anticipated speech Fed Chair Jerome Powell is scheduled to give on Friday morning.

Harker is a voting member of the rate-setting Federal Open Market Committee. That body meets next month and there is considerable uncertainty over whether it will follow its July rate rise with another increase then.

The Fed started raising its overnight target rate aggressively in March 2022 as it sought to tame the worst surge of inflation seen in decades. Over recent months it has slowed the pace of those increases and now has its target at between 5.25% and 5.50%.

Questions about the outlook for policy are being driven by the fact that inflation has been moderating but still remains too high relative to the central bank’s 2% objective, in the view of many Fed policymakers. At the same time, the job market remains very strong and growth has been particularly resilient, which suggests that even as price pressures have fallen the Fed has space to boost rates further to lower inflation.

But for Harker, it’s very much a question of the economy working through the ongoing impact of the Fed’s prior actions. “What I’ve heard loud and clear through my summer travels is, ‘please, you’ve gone up very rapidly. We need to absorb that,’” the bank president said of his local contacts.

Harker said in his appearance he sees inflation cooling to 4% this year, 3% next year and back to the 2% goal in 2025. He expects the unemployment rate to rise a touch to 4% or maybe higher and he believes growth should moderate.

Harker also said the surge in long-term borrowing costs seen lately might help moderate activity, while noting he’s watching the situation for any possible trouble.

Harker also said it’s too soon to say when the Fed might cut interest rates. He said inflation would need to cool further “before I’d be willing to make a cut.”

(Reporting by Michael S. Derby; Editing by Andrea Ricci)