Interest Rate Hikes: Fed’s Harker Is Ready To Move Back to 25 Basis-Point

graphic concept with arrow Interest Rate Hikes: Fed’s Harker Is Ready To Move Back to 25 Basis-Point

Interest Rate Hikes

On Thursday, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said that the central bank should consider interest rate hikes further to cool down inflation but that it could likely do so at a considerably slower pace than it did last year.

According to the speech transcript, Harker stated, “I believe that we will increase rates a few more times this year, albeit, to my judgment, the days of our increasing them 75 basis points at a time are clearly past.” “Going ahead, I think 25 basis point increases are reasonable.”

Harker predicted that the Fed would pause interest rate hikes for some time after reaching a “neutral” point. Eventually, this year, “I think that the policy rate will be restrictive enough that we will maintain rates in place to allow monetary policy to do its thing,” the official added.

In 2019, Harker will participate in the FOMC vote to determine interest rates. The Federal Reserve hiked interest rates at a historically rapid clip in 2022, taking them from near zero in the spring to between 4.25 and 4.5% by the end of the year.

At the most recent FOMC meeting, the Fed projected that the inflation rate would level at 5.1% in 2023. There has been much discussion in the financial markets about whether or not the Fed can move in smaller hikes than they did last year when many of the increases were in 75 basis point increments. As the Federal Reserve nears the endgame of its tightening process, it is widely expected to reduce to 25 basis point increases this year from last month’s half-point boost.

Harker expressed confidence in the economy’s capacity to weather the Fed’s moves in his address. The official predicted a 1% increase in GDP for 2023, so although the year would be “modest,” he is “not anticipating a recession.”

“It’s heartening to see indicators that inflation is decreasing even as we raise rates,” Harker said of the nation’s economic health.

When asked about the state of the job market, Harker stated, “I’m most delighted that the labor market continues in outstanding form.” He predicted that unemployment would rise from 3.5% to 4.5% this year, then drop to 4% during the next two years.

Harker said that he thinks the recent increase in pricing pressures has peaked for the time being.

The official predicted that “the eye-popping inflation numbers of 2022 are in the rearview mirror.” He predicted that this year’s core inflation rate would be around 3.5%. As Harker pointed out, the Fed is expected to achieve its inflation target in 2025.

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.