Philadelphia Fed President Patrick Harker indicated overnight that his base case scenario includes one interest rate cut by the end of the year, contingent on several more months of improving inflation data.
Harker emphasized the need for ongoing assessment, stating, “If all of it happens to be as forecasted, I think one rate cut would be appropriate by year’s end.”
However, he also left room for adjustments based on new economic data, noting, “I see two cuts, or none, for this year as quite possible if the data break one way or another…we will remain data dependent.”
Harker believes that the current policy interest rate, which has been steady for nearly 11 months, remains effective in maintaining restrictive conditions to bring inflation back to target and mitigate upside risks.
His outlook includes slowing but above-trend economic growth, a modest rise in the unemployment rate, and a gradual return to target inflation, which he describes as a “long glide.”
