Fed's Harker Says He's Not in a Rush to Raise Rates

05/17/19 07:17 PM EDT
By Paul Kiernan 

PHILADELPHIA -- Federal Reserve Bank of Philadelphia President Patrick Harker said Friday he's not sure about the likely path of interest rates this year.

Mr. Harker appeared to soften a position he gave in a speech May 6 in which he said he saw " one [rate] increase at most this year; possibly one, at most, next."

"I said 'at most' one increase this year. I am not predicting one this year," Mr. Harker told reporters Friday. "There's so much uncertainty right now, it's hard to see where that would happen."

Since Mr. Harker's previous rate outlook, trade tensions between the U.S. and China have intensified, with the Trump administration deciding to raise tariffs on $200 billion of imported Chinese goods to 25% from 10%. Economists say higher tariffs could dent economic growth when many of them already expect growth to slow.

Though the Fed raised its benchmark rate four times last year, to a range between 2.25% and 2.5%, Mr. Harker said he thinks borrowing costs are still below the neutral level that neither stimulates nor restricts growth. But he said he's "not in any rush" to bring rates up.

"We'll let this play out," Mr. Harker said.

One issue central bankers have been grappling with is the risk that relatively low inflation could start to become self-perpetuating as businesses and consumers start to doubt that prices will rise at the 2% rate the Fed targets.

"If inflation expectations become unanchored, they can start to drift down to a point that I believe would be dangerous," Mr. Harker said. "I'm a little worried about inflation expectations drifting down."

 

(END) Dow Jones Newswires

May 17, 2019 19:17 ET (23:17 GMT)

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