MNI: Fed's Harker Sees Reason To Hold Rates Steady For Now
MNI (WASHINGTON) - Federal Reserve Bank of Philadelphia President Patrick Harker signaled comfort Monday with holding interest rates steady for now, citing upside risks to inflation and downside risks to employment as well as a number of uncertainties on the horizon.
He maintained that inflation should get back to 2% and rates should fall over the long run under restrictive monetary policy.
"While I won’t commit to a specific timetable, I remain optimistic that inflation will continue a downward path and the policy rate will be able to decline over the long run," he said in remarks prepared for a Global Interdependence Center meeting in Nassau, Bahamas.
"All in all, the current data paints a picture of an American economy that continues to function from a position of strength," he said. Inflation is still elevated but moving in the right direction while labor is largely in balance, he said. "And these are reasons enough for holding the policy rate steady." (See: MNI INTERVIEW: Fed Likely On Hold For Most Of 2025-Kroszner)
CLOUDY OUTLOOK
Upside risks to inflation and downside risks to employment "remain in the balance," Harker said.
Key inflation categories like shelter are moving in the right direction, and the surprisingly strong CPI reading in January may be partly due to out-of-date season adjustments, Harker said.
Meanwhile, the labor market has "recalibrated to where it was in 2018 or 2019," a strong position, he said. But he noted signs that consumer delinquency rates may rise and wondered "how long this appetite for spending will persist."
It's not the Fed's role to comment on the Trump Administration's trade and fiscal policies, and "we simply do not yet know what, if any, impacts we may see from new economic policies and priorities, whether they be domestic or foreign in nature and impact," he said.
"Inflation has remained elevated and somewhat sticky over the past several months, both in the overall and core figures. But that notwithstanding, I do believe that our current positioning will bring inflation back to target," he said.
Monetary policy remains restrictive, he said. "We need to continue letting monetary policy do its work and letting the data roll in."