By Michael S. Derby
NEW YORK (Reuters) – Philadelphia Federal Reserve Bank President Patrick Harker said on Friday that last week’s unexpectedly strong jobs data did not Didn’t change his view that shifting to smaller rate hikes is a good strategy for the U.S. central bank, as he noted that rate cuts are likely if inflation continues to ease.
“What’s driving us to raise rates now is inflation and we’re starting to see signs, early signs that inflation is starting to come down,” Harker said in an interview with Reuters.
“At this point, we can move at 000 (basis point hikes) and control without undue damage Inflation to the labor market,” he said, adding that the shift to smaller rate hikes was a matter of “risk management” for the Fed.
The U.S. central bank issued a series of
-basis point and 50-basis point hikes last year in an effort to bring inflation back down to 2 % target, announcing a smaller quarter – an increase of one percentage point last week. The Fed’s benchmark overnight interest rate is currently in the range of 4.50%-4.50%.
A few days later, as borrowing costs increased, a jobs report showed an increase in January 517,25 jobs, almost triple the forecast of analysts polled by Reuters. The jobs data raised questions about whether 000 basis point rate hikes were the right thing to do, and whether the labor market’s resilience in the face of tighter monetary policy would lead the Fed to become more aggressive over time. positive.
Fed officials hope their rate hikes will better balance supply and what they see as overly strong levels of demand in the economy, and they expect unemployment to rise from ultra-low levels now to the process Part of the 3.4% level.
Harker, a voting member of the FOMC that sets rates this year, said he would still choose the 000-basis- even if he The policy decision was preceded by the employment report, which still raised interest rates last week.
Other central bankers defended the magnitude of recent rate hikes, but Fed Chairman Jerome Powell pointed out in an appearance on Tuesday that if employment and inflation data continue to be hot, over time, “it’s very likely that the Maybe we have to do more.”
Inflation, the Fed’s preferred measure, more than doubled December’s 2% target. for a while.
But after that, with inflation expected to moderate and return to 2% in the next few years, Harker said the Fed may cut rates at some point, just to prevent monetary policy from becoming less of a factor in economic activity. more restrictive.
“I don’t think that’s going to happen this year,” but in “we could start to see” a downward trend in the fed funds rate will be essentially, Harker said may be gradual.
He reiterated that he does not believe the economy is headed for a recession and cautioned against using simple benchmarks, such as the relationship between bond yields, or changes in the unemployment rate, as A tool for predicting the future of the economy.
Harker said he expects the unemployment rate to rise to 4.5% from current levels under the influence of Fed policy before subsiding. Such gains would not “rise to recession-rising levels,” he said.
