By Michael S. Derby
NEW YORK (Reuters) – Philadelphia Federal Reserve President Patrick Harker reiterated on Wednesday that he’s ready for the U.S. central bank to move to a slower pace of interest rate rises amid some signs that hot inflation is cooling off.
“High inflation is a scourge, leading to economic inefficiencies and hurting Americans of limited means disproportionately,” Harker said in prepared remarks for a speech that closely followed remarks from earlier in the month. To get inflation under control, the Fed’s “goal is to slow the economy modestly and to bring demand more in line with supply,” he told a group in Newark, Delaware.
To get there, Harker, who will hold a voting role on the rate-setting Federal Open Market Committee this year, is ready to raise the central bank’s benchmark overnight interest rate beyond the current 4.25%-4.50% range.
“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Harker said in reference to the supercharged rate hiking cycle embraced by the Fed last year.
“Hikes of 25 basis points will be appropriate going forward,” and at some point this year Fed policy will be at a level that will restrain activity to help lower price pressures back toward its 2% target, he added.
It will take a while to achieve that goal, Harker said. “We are starting to see inflation come down across a spectrum of goods,” and core inflation should ease to 3.5% this year and to 2.5% next year and back to the target in 2025, he said.
Harker said the U.S. economy should grow 1% this year, adding that he doesn’t believe it will fall into a recession. Harker also expects the U.S. unemployment rate, currently at 3.5%, will rise to 4.5% this year before falling back to 4% in following years.
(Reporting by Michael S. Derby; Editing by Paul Simao)
