(Bloomberg) — Federal Reserve Bank of Philadelphia President Patrick Harker said he views one interest-rate cut as appropriate for this year based on his current forecast, adding he’d like to see “several” more months of improving inflation.
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Harker said a recent report showing consumer prices cooled in May was “very welcome,” but policymakers need more evidence to be confident inflation is headed to the central bank’s 2% goal. He said he is open-minded to other paths for policy depending on what those reports show as uncertainty remains high.
“In my view, this calls for a cautious approach,” Harker said Monday during a question and answer session after he delivered remarks at an event in Philadelphia. “If we start to see several months of where we’re seeing data move in the right direction, I could see taking action. But I’m not there right now.”
Fed officials left their benchmark rate unchanged last week at a two-decade high but trimmed their outlook for how much they expect to ease in 2024. Policymakers now foresee just one decrease this year compared to the three they predicted in March, according to the median projection.
The Philadelphia Fed chief said his outlook for rates lined up with the median. He currently expects economic growth to slow — but remain above trend — and the unemployment rate to increase modestly. He also sees a “long glide” back to the Fed’s inflation goal.
“If all of it happens to be as forecasted, I think one rate cut would be appropriate by year’s end,” Harker said in his remarks. “Indeed, I see two cuts, or none, for this year as quite possible if the data break one way or another. So, again, we will remain data dependent.”
Harker, who doesn’t vote on monetary policy decisions this year, said rates are high enough to keep reducing inflation, even though progress has been uneven.
“I believe that the current policy interest rate, which has been held steady for nearly 11 months, will continue to serve us well for a bit longer, holding us in restrictive territory to bring inflation back to target and mitigate upside risks,” he said.
(Updates with additional Harker comments from first paragraph.)
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