© Archyde.com. Fed’s Harker hawks: Lack of progress on inflation, big rate hikes still needed
Financial Associated Press, October 21 (Editor Niu Zhanlin)Eastern time on Thursday, Philadelphia Fed President Harker said that raising interest rates has done little to curb inflation, and the Fed has not completed its mission, so further sharp interest rate hikes are needed.
After Harker’s hawkish remarks, the three major U.S. stock indexes fell significantly, with the 10-year U.S. bond yield rising above 4.2% for the first time since 2008.
In a speech in New Jersey, Harker said bluntly: “We’re going to keep raising rates for a while, which is frankly disappointing given the lack of progress we’ve made in containing inflation, and I expect that by the end of the year, The federal funds rate is probably well above the 4% level.” Currently, the federal funds rate is in the 3%-3.25% range.
The Fed is widely expected to raise interest rates by 75 basis points for the fourth time in early November. The FOMC is expected to raise rates a little more in 2023 and then stabilize at around 4.5%-4.75%.
Like several other officials, Harker also noted that higher interest rates are likely to remain in place for an extended period of time.
“Sometime next year, we will stop raising rates and assess the policy impact,” Harker said. “At that time, Fed policy is expected to remain restrictive for some time, allowing monetary policy to do its job. The higher cost of capital will It will take a while to play a role in the economy. The Fed can further tighten policy after the pause if needed.”
Inflation in the U.S. is now at its highest level in more than 40 years. The Fed’s favorite inflation gauge, the personal consumption expenditures (PCE) price index, rose 6.2% in August from a year earlier, while the core PCE price index, which excludes food and energy, was 4.9%, both well above the Fed’s 2% target.
Harker stressed that inflation will eventually come down, but it will take some time to reach our target.
Harker was more optimistic about the economic outlook, with growth set to slow this year due to high inflation and tighter financial conditions, but GDP growth of 1.5% next year.
At the same time, Fed Governor Cook expressed a similar view, noting that inflation remains stubbornly at an unacceptably high level and that continued interest rate hikes may be needed.