Harker Says Fed May Need Just 2 Rate Hikes in 2018
With a new economic normal in place, Federal Reserve Bank of Philadelphia President Patrick Harker, said Friday he thinks the Fed should reassess its targets and may want to raise rates only twice this year.
“The most important issue on the table right now is that we need to consider the possibility of a new economic normal that forces us to reevaluate our targets,” Harker told the American Economic Association, according to prepared text released by the Fed.
“I’m a firm believer in the Fed’s mantra of being data driven, and 2018 is, for me, a year to be in monitoring mode,” he said.
With research suggesting the economy is in a low r-star environment and a dip in market interest rates, it “obviously pulls us closer to the zero lower bound and leaves us with less policy ammunition in an unexpected turn of events or, worse, a full-blown crisis. We can only play the hand we’re dealt, and fed funds can only operate within the scope that the natural funds rate allows.”