MNI: Fed's Harker Makes Case For Holding Rates

The Federal Reserve should keep interest rates on hold because the inflation outlook has improved significantly and the full effects of an aggressive monetary tightening have yet to be felt, Philadelphia Fed President Patrick Harker said Friday.

"We know that the full impacts of those increases may not yet be fully absorbed across the economy. We also turned around our balance sheet with near equal speed. We put ourselves in restrictive territory very quickly," Harker said in prepared remarks to the Risk Management Association.

"But the speed with which we worked then is also part of my argument for holding steady now. As I noted, policy rates are restrictive, and holding them steady now will keep us in restrictive territory and steadily pressing down on inflation. This is a time where doing nothing is doing something, and, in fact, I’d argue that it equates to doing quite a lot." (See: MNI POLICY: Fed Convinced Past Hikes' Full Effect Yet To Hit)

Harker said "the data I see, and all that I hear, point to a steady disinflation that is already under way and sustained, if slow." He expects inflation to drop below 3% in 2024 before leveling out at the central bank's 2% target thereafter.