Philadelphia Fed President Patrick Harker said Wednesday evening that he thinks the Federal Reserve should not move on interest rates at least for a while, adding that he did not support that last two rate cuts.
“My own view is that we should hold steady for a while and watch how things unfold before taking any more action,” Harker said at an event in Delaware.
The Federal Open Market Committee, which sets interest rate policy, has lowered the benchmark interest rate by 25 basis points in three consecutive meetings. Citing trade developments and sluggish global growth, Fed Chairman Jerome Powell has described the 75 basis points of total cuts as “insurance” against risks that could threaten growth of the U.S. economy.
Powell has also cited tepid inflationary pressures, which have pushed core personal consumption expenditures (the Fed’s preferred inflation measure) below the central bank’s 2% stated target.
But Harker said he is not as concerned about undershooting inflation, explaining that inflation is not “running backwards” but rather “edging up.” In the spring, core PCE was coming in between 1.5% and 1.6%, but core PCE for August and September has been 1.8% and 1.7%, respectively. Harker said he expects inflation to reach the Fed’s 2% goal within the next 18 to 24 months.
On the labor market, Harker says the Fed appears to have “met our remit,” pointing to a 50-year low unemployment rate and job gains above trend. In October, the U.S. economy added 128,000 jobs and kept the unemployment rate at 3.6%.
Harker said he therefore felt the Fed did not need to cut rates and provide more accommodation. Harker, along with the other Fed presidents, serve on the FOMC along with the Fed governors based out of Washington, D.C. All the governors but only four designated Fed presidents have votes that ultimately determine Fed policies on where rates go.
“I am not a voting member on the FOMC this year, but I held this same view regarding the last two cuts,” Harker said. “I would have preferred to hold firm.”
Harker is not the only FOMC member to oppose the Fed’s October rate cut. Atlanta Fed President Raphael Bostic, who is also not a voting member, also reportedly said he did not support the October cut. Kansas City Fed President Esther George and Boston Fed President Eric Rosengren, both voting members of this year’s committee, dissented from the decision and voiced their preference to hold rates steady in that meeting.
Harker’s comments come hours after Powell told Congress that the Fed’s current target range for interest rates, between 1.50% and 1.75%, is “likely to remain appropriate” for the time being.
The Fed’s final policy-setting meeting of the year will take place December 10 and 11. Harker will rotate in as an FOMC voter beginning next year.
Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.