Philadelphia Fed President Patrick Harker has indicated that “some additional tightening may be needed to ensure policy is restrictive enough to support both pillars of our dual mandate.” Harker expects that once this point is reached, which he believes should happen this year, the Fed will “hold rates in place and let monetary policy do its work”.
Harker also noted that the economy remains strong and inflation is coming down, albeit slowly. He projected that inflation, currently at a 5% annualized rise in the personal consumption expenditures price index, would fall to 3% to 3.5% this year and reach 2% in 2025. The unemployment rate, currently at 3.5%, is expected to move up to around 4.4% this year amid tepid growth.
The bank president acknowledged the impact of last month’s financial sector woes on the economy, stating that “it will take some time to evaluate how recent events may impact overall economic activity and inflation.”
Harker added that he expects to see tighter credit conditions for households and businesses, which may slow economic activity and hiring, but the full extent of this impact is still unclear.