© Reuters. FILE PHOTO: Federal Reserve Bank of Philadelphia President Patrick Harker speaks before the Kansas City Fed’s annual Economic Policy Symposium, in Jackson Hole, Wyoming, U.S., August 25, 2022. REUTERS/Ann Saphir
(Reuters) – The Federal Reserve has not yet finished its round of interest rate hikes to reduce inflation, but it is likely close, Philadelphia Fed President Patrick Harker said on Tuesday.
“From my point of view, we’re not done yet … but we’re probably close,” Harker said in prepared remarks at an event in Philadelphia. “Sometime this year, I expect the benchmark rate to be tight enough to hold rates and let monetary policy do its job.”
Harker earlier said in an interview with Reuters last week that moving to 25 basis point interest rate hikes was a good strategy for the US central bank, as he signaled the prospect of rate cuts in 2024 if inflation continues to decline.
The Fed’s benchmark overnight loan rate is currently in the 4.50%-4.75% range.
Harker added that he does not see a recession on the horizon. Instead, he pointed to the strength of the labor market as an indication that the central bank can bring inflation back to its 2% target without a sharp increase in layoffs. By the Fed’s preferred measure, inflation is still running at an annual rate of 5.0%.
“I think we’ll see a very slight increase in unemployment, likely to be modestly above 4 percent this year. It’s an underappreciated advantage that the Federal Reserve is tackling inflation from such a strong position in the labor market,” Harker said.