MNI: Fed's Harker Sees 1 Rate Cut By Year-End
Federal Reserve Bank of Philadelphia President Patrick Harker said Monday he expects one interest rate cut by year-end if data meet his forecasts, calling the latest inflation report "quite promising" in signaling that progress on disinflation has resumed.
"I have a forecast for inflation, employment, and economic activity: slowing but above trend growth, a modest rise in the unemployment rate, and a long glide back to target for inflation," he said in remarks prepared for a Global Interdependence Center conference in Philadelphia.
"And if all of it happens to be as forecasted, I think one rate cut would be appropriate by year’s end." He cautioned against taking that as a "lock-down commitment" and said he will stay data dependent.
"Indeed, I see two cuts, or none, for this year as quite possible if the data break one way or another." (See: MNI INTERVIEW: Fed To Cut Twice In '24, Start Sept - Sheets)
NOT YET CONFIDENT
The FOMC last week held benchmark rates steady at their highest level in more than two decades and released fresh projections showing officials were split between one, two and zero cuts through the end of 2024.
"Monetary policy overall remains positioned in restrictive territory to bring inflation back to its 2% target, while minimizing broader economic risks," Harker said.
Inflation in the first quarter came in surprisingly strong and "threatened to become a hill to climb," he said. "Yet, while the lack of progress toward the inflation target was concerning, inflation did not re-ignite."
"The latest inflation data have been quite promising that progress on disinflation has resumed. But 'promising' falls short of the confidence I want to have, before cutting rates, that inflation is on a sustainable path back to target," Harker said.
"I believe that the current policy interest rate, which has been held steady for nearly 11 months, will continue to serve us well for a bit longer, holding us in restrictive territory to bring inflation back to target and mitigate upside risks." (See: MNI INTERVIEW: Quarterly Fed Cuts To Start In Dec - Reinhart)