Harker Says Fed May Need Just 2 Rate Hikes in 2018

The Bond Buyer - - Market News - — Gary E. Siegel

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.”

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