MNI: Fed Is 'Likely Close' To Done On Tightening, Harker Says

The Federal Reserve is not yet finished raising interest rates to combat high inflation but is edging closer to that point, with a pause expected “at some point this year,” Philadelphia Fed President Patrick Harker said Tuesday.

“We are not done yet … but we are likely close,” Harker said in prepared remarks.

“At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work. We are also shrinking our balance sheet, which is removing a significant amount of accommodation.”

Harker was speaking on a day when the latest CPI report for January showed further moderation, with headline inflation down a notch to 6.4% while core CPI climbed 5.6%, the smallest gain since December 2021.

“What’s encouraging is that even as we are raising rates, and seeing some signs that inflation is cooling, the national economy remains relatively healthy overall,” he said. “I’m most pleased that the labor market remains in excellent shape.”

The U.S. economy created more than half a million jobs in January while the jobless rate hit a new 50-year low of 3.4%.

“Rates are now at a level that allow us to slow down and proceed cautiously,” he said, reiterating his support for moving in quarter point increments.