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Fed’s Harker calls for ‘action against inflation’, sees 3 or 4 rate hikes


Philadelphia Fed President Patrick Harker said on Thursday he expected three or four rate hikes this year to be inflation-resistant.

His thoughts, outlined in a live interview on CNBC”Closing bell,” which is in line with the Federal Open Market Committee’s estimates released in December.

But while officials later wrote the possibility of an increase of three quarters of a percentage point in 2022 on the Federal Reserve’s benchmark overnight borrowing rate, Harker said he could expand further.

“We need to act on inflation. It’s more persistent than we thought it was a while ago. I’ve been out of the ‘temporary’ group for a while now,” he said, citing terminology that officials use. Used by the Fed to describe inflation through most of 2021 before pivoting towards year-end.

“I think action this year is appropriate,” Harker said. “Three [hikes] is what I wrote, but four things are not out of the question in my mind. “

Harker’s comments come as Labor Department reports show inflation is picking up in the US economy. Consumer price inflation at 7%, the highest annual rate since June 1982, while wholesale prices in 2021 increase by 9.7%, the biggest change in data since 2010.

After its December meeting, the Federal Open Market Committee set a schedule that would end monthly bond purchases around March. Minutes released later suggests that some members also think the Fed should start reducing the size of its balance sheet, potentially by allowing some of its bond proceeds to roll out each month.

But Harker advocates a slower approach to the balance sheet question. He suggested the Fed should wait until it raises rates “for the sake of the 100 basis point argument,” or four hikes, before starting to ease what has become more. $8.8 trillion balance sheet as a result of property purchases during the pandemic. The basis point is one hundredth of a percentage point.

“I don’t want to do it all at once. I think it’s just the wrong way,” he said. “Let’s do them in stages.”

Slowing down will help the economy bounce back from possible shocks due to the Fed’s easiest step back from monetary policy in its history, he said. He said the Fed can avoid killing the recovery if it moves “carefully and methodically. This is why I don’t have to raise interest rates and do balance sheet normalization along with it.” a while,” he said.

Early in the day, Chicago Fed President Charles Evans also said he sees three rate hikes as very likely, although he’s also open to more.

“[Three increases are] Evans told reporters there could be a good bid opening this year depending on how the data is deployed.

Neither Evans nor Harker were voters in this year’s FOMC, although they may voice their opinions at policy meetings and their views are part of the “scoring plot” of committee on interest rate expectations of its members.

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