MNI: Harker Sees Series of Deliberate Fed Rate Hikes This Year

Inflation that is running far too hot for the Federal Reserve will force policymakers to tighten this year in a “deliberate, methodical” manner, Philadelphia Fed President Patrick Harker said Wednesday.

Along with rate hikes “we will begin to reduce our holdings of Treasury securities, agency debt, and mortgage-backed securities soon,” Harker said in prepared remarks to the Delaware State Chamber of Commerce. “Inflation is running far too high, and I am acutely concerned about this.”

Harker described inflation pressures as broad based and troublesome, ascribing its surge to a variety of factors. “Generous fiscal policies, supply chain disruptions, and accommodative monetary policy have pushed inflation far higher than I — and my colleagues on the FOMC — are comfortable with,” Harker said. “I’m also worried that inflation expectations could become unmoored.”

Harker sees potential for a service sector boom as the economy emerges from another wave of the Covid pandemic.

He expects inflation, which surged 6.4% in the year to February according to the Fed’s preferred PCE measure, will moderate to a still elevated 4% for 2022 as a whole. “The following two years should bring it back to our target of 2%,” he said.