Fed’s Harker suggests holding rates at current level

The economy may have reached the point where the Federal Open Markets Committee can hold off further increases in the federal funds rate and let the monetary policy actions it has already taken run their course, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said today.

Harker, a voting member of the FOMC, said he expects only a modest slowdown in economic activity in the near future, with inflation gradually falling to the Federal Reserve 2% target by 2025. The economy seems to be on the path to a so-called “soft landing” where a recession is avoided, he said. “Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work.”

Harker’s comments came a day after Fed Governor Michelle Bowman said that further rate hikes will likely be needed. And Harker cautioned that should the FOMC decide to hold the rate at the current range of 5.25% to 5.5%, it likely won’t lower that figure anytime soon. “Should we be at that point where we can hold steady, we will need to be there for a while,” he said. “The pandemic taught us to never say never, but I do not foresee any likely circumstance for an immediate easing of the policy rate.”