Fed's Harker: Don't look for any interest-rate cuts 'right now and right away'

By Greg Robb

The biggest risk is lowering rates too early, Philadelphia Fed president says

The Federal Reserve is getting close to cutting interest rates but a move in the near-term is unlikely, said Philadelphia Fed President Patrick Harker on Thursday.

"I would caution anyone from looking for [a rate cut] right now and right away," Harker said in a speech at the University of Delaware.

Harker, who is not a voting member of the Fed's interest-rate committee this year, said the Fed's "greatest economic risk" comes from acting too early to lower interest rates. Going too soon might "reignite inflation and see the work of the past two years unwind before our eyes," he added.

Minutes of the Fed's January meeting, released Wednesday, showed most Fed officials were in no hurry to lower rates.

"We can't go too heavy on the gas too soon, lest we lose control or pass our exit completely and have to reroute," he said.

From March 2022 until July 2023, the Fed raised interest rates from zero to a range of 5.25%-5.5%. Fed officials believe that this level of interest rates puts downward pressure on economic demand, which will help lower inflation.

While inflation has come down fairly steadily since last summer, the most recent prints of the consumer-price and producer-price indexes came in hotter than expected in January.

Harker said there were bound to be "bumps along the road" to lower inflation and that he wanted to see more data that the Fed is on the right path.

While now is not the time for rate cuts, Harker noted that he would send out an alert when it is appropriate.

"I will signal my belief that we're ready for a rate decrease when all the data - both the hard and the soft - give me that signal," he said.

Harker said he was looking for signs that inflation is coming down for both goods and services.

Stocks DJIA SPX were higher on Thursday while the 10-year Treasury yield BX:TMUBMUSD10Y inched up to 4.322%.

-Greg Robb

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02-22-24 1515ET

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