On Tuesday, Patrick Harker, President of the Philadelphia Fed, remarked that the central bank may have reached the end of its current rate-hiking course. In a discourse, the FOMC member expressed his conviction that they should be patient and maintain their current rates and give their monetary policy activities a chance to achieve their objectives. Harker further indicated that rate reductions in the near future are improbable.
Philadelphia Federal Reserve President Patrick Harker voiced his belief on Tuesday that the central bank had likely reached the end of its current rate-hiking cycle. A voter this year on the rate-setting Federal Open Market Committee, Harker expressed optimism in the battle against inflation and faith in the economy. He stated that, if there are not "any alarming new data" between now and mid-September, he believes the Fed should be able to remain "patient and hold rates steady" in order to allow its political maneuvers to take effect. July saw the FOMC's 11th rise of the key interest rate since March 2022, taking it from near zero to a target range of 5.25%-5.5%, which is the highest it has been in over two decades. Even though numbers issued in June pointed to an additional quarter-point increase this year, there is divergence of opinions on what the next steps should be. New York Fed President John Williams and Governor Michelle Bowman have divergent ideas, with Williams supporting the idea of the elevations being over, while Bowman supposes that more hikes are necessary. Data provided by CME Group reveals that markets are betting more than an 85% chance that the Central Bank will leave matters unchanged at the September 19-20 meeting. The chances of a decrease being implemented as soon as March 2024 are also increasing.
Harker made it clear that the Fed will not be decreasing the rate in the immediate future and mentioned that it will be crucial to remain patient if a rate-holding decision is decided upon. The Central Bank had to take a step back from its near-zero rate policy after inflation levels hit an all-time high of more than 40 years. Initially, the officials treated the high prices as “transitory”; however, they were ultimately forced into a series of successive three-quarter point rate rises. Even though some economists are worried that the measures may lead into a recession, Harker showed confidence in the economy. He believes inflation will eventually get to its target of having two percent growth, but he also expressed some concerns about commercial real estate as well as the effect of student loan payments on the economy.
Policymakers will get their next chance to assess the inflation situation on Thursday when the Bureau of Labor Statistics releases its July Consumer Price Index. Economists within Dow Jones predict that costs will rise 0.2% on a monthly basis and 3.3% within a twelve-month period. When excluding food and energy, the increase is estimated to be of 0.2% and 4.8% respectively.
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