Patrick Harker, president of the Philadelphia Federal Reserve Bank, said on Wednesday that he expects the US central bank to make two more half-point rate hikes before switching to quarter-point hikes until the “plague” of inflation has beaten back.
With inflation at its 40-year high, the Fed has stepped up efforts to curb demand for goods and labor and ultimately ease price pressures by making it more expensive to borrow.
Earlier this month, the central bank raised its key rate by half a percentage point, the first such move in more than two decades, and Fed Chair Jerome Powell said his fellow policymakers were broadly behind two more such rate hikes during the coming Fed. meetings.
“If there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July going forward,” Harker said in comments prepared for delivery to the Mid-Size Bank Coalition of America. “After that, I expect a series of fund rate hikes at a measured pace until we’re confident inflation is moving toward the commission’s inflation target.”
Under former Fed Chairman Ben Bernanke, the Fed used the term “measured” to refer to a series of quarter-point rate hikes in the mid-2000s.
Chicago Fed chief Charles Evans similarly indicated support on Tuesday for an initial burst of policy tightening and then for a more superficial rate hike path.
Powell, for his part, has not been too specific about his expectations for the policy trajectory after July. On Tuesday, he said the Fed will continue to hike rates until it sees clear and compelling evidence that inflation is cooling.
Fed policymakers say the current period of high inflation — which is more than three times the Fed’s 2% target — is the product of over-demand colliding with limited supply.
Harker said he expects the US economy to grow by 3% this year, enough to keep labor markets tight through the end of the year despite rate hikes.
(Writing by Ann Saphir; editing by Cynthia Osterman)
This post Fed’s Harker sees 50 basis point rate hikes in June, July, then ‘measured’ increases
was original published at “https://financialpost.com/pmn/business-pmn/feds-harker-sees-50-bps-rate-hikes-in-june-july-then-measured-hikes”