MNI: Fed's Harker Sees March Hike, Warns of More Tightening

The Federal Reserve could start raising interest rates rates in March and could well continue to raise rates throughout the year, Philadelphia Fed President Patrick Harker said Thursday.

"I expect us to complete our taper of asset purchases by March. Then, we can probably expect a rate hike of 25 basis points. We could very well continue to raise rates throughout the year as the data evolve," Harker said according to prepared remarks. "After nearly two years of accommodation, I think we can expect a fair amount of tightening in 2022."

Harker is one of several Fed officials to signal support for liftoff in March, along with regional bank presidents Esther George of Kansas City, James Bullard of St. Louis, Cleveland’s Loretta Mester, and San Francisco's Mary Daly. Ex-officials have told MNI they are expecting a signal at this month's FOMC meeting preparing for a March hike.

MAX EMPLOYMENT

Harker expressed concern that inflation is proving more “persistent and higher” than the Fed's long-term target of 2 percent. “The inescapable logical conclusion of this situation ― inflation higher than we want and a very robust jobs market ― is to tighten monetary policy,” he said, in a speech at a Philadelphia Business Journal Economic Forecast event.

While expecting a step down in growth from a little over 5% last year to a range of 3 to 4% this year, Harker argued that the central bank's target of “maximum employment” has been met.

Citing millions of job opening sand widespread labor shortages, he said that employment shortfalls are not a demand problem, but rather a supply problem that must be fixed through methods other than monetary policy.