Harker says he's comfortable if inflation overshoots Fed target

Federal Reserve Bank of Philadelphia President Patrick Harker defended the central bank’s symmetrical inflation target, saying that he’d be comfortable with price increases at 2.5% — half a percentage point higher than the central bank’s official goal.

Federal Reserve Bank of Philadelphia President Patrick Harker
Patrick Harker, president and chief executive officer of the Federal Reserve Bank of Philadelphia, speaks during a conference on economic outlook in Philadelphia, Pennsylvania, U.S., on Tuesday, April 12, 2016. Harper spoke about how he viewed the U.S. economy as fundamentally healthy, persistently low inflation risks undermining the credibility of the central bank's 2 percent goal. Photographer: Charles Mostoller/Bloomberg *** Local Caption *** Patrick Harker

Harker, who does not vote on monetary policy this year, said the Fed should “take this slow and steady,” but “if we see inflation starting to accelerate past 2.5%, I think we have to act. Absent that, I think there are lots of good reasons to hold off.”

Harker said his base case for interest-rate increases is still three this year and three in 2019. He said he is “open” to a fourth 2018 move if inflation picks up. The policy-setting Federal Open Market Committee as a whole is projecting four hikes this year, according to the median estimate of its June economic projections.

Harker also said that he sees the Fed’s benchmark lending rate rising to 3% in the longer term, though the Fed could get to 3.25% this cycle in a mild overshoot.

“I ideally would not like to do that, but it’s possible,” he said.

Bloomberg News
Monetary policy Federal Reserve FOMC Federal Reserve Bank of Philadelphia
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