MNI: Philly Fed's Harker Expects Series of Methodical Hikes

Philadelphia Federal Reserve President Patrick Harker said Tuesday inflation is widespread and he expects the U.S. central bank to enact a series of hikes this year, with a reduction in the balance sheet "soon."

"We raised our target by 25 basis points [in March], and I expect a series of deliberate, methodical hikes as the year continues and the data evolve. I also anticipate that we will begin to reduce our holdings of Treasury securities, agency debt, and mortgage-backed securities soon," he said.

"Inflation is widespread. It is showing up throughout a vast array of goods that comprise the CPI 'basket'— and among some of those that aren’t in the basket," he said. While Russia’s invasion of Ukraine will add to inflation pressure, he said, inflation should begin to taper this year to probably around 4% with another two years before it gets back to the Fed's 2% target.

"I’m also worried that inflation expectations could become unmoored," said Harker, who has been an alternate FOMC voter this year. Fed staffers and others have told MNI that inflation expectations are at a rising risk of unmooring.

The Philly Fed chief said the unemployment rate should continue to fall this year from 3.8% today. "We can probably expect to come in around 3% to 3.5% GDP growth this year — and then falling to trend growth of 2% to 2.5% during the next couple of years," he said in prepared remarks for a speech to The Center for Financial Stability.