Federal Reserve Bank of Philadelphia President Patrick Harker defended the central bank’s symmetrical inflation target, saying that he’d be comfortable with price increases at 2.5% — half a percentage point higher than the central bank’s official goal.
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Harker, who does not vote on monetary policy this year, said the Fed should “take this slow and steady,” but “if we see inflation starting to accelerate past 2.5%, I think we have to act. Absent that, I think there are lots of good reasons to hold off.”
Harker said his base case for interest-rate increases is still three this year and three in 2019. He said he is “open” to a fourth 2018 move if inflation picks up. The policy-setting Federal Open Market Committee as a whole is projecting four hikes this year, according to the median estimate of its June economic projections.
Harker also said that he sees the Fed’s benchmark lending rate rising to 3% in the longer term, though the Fed could get to 3.25% this cycle in a mild overshoot.
“I ideally would not like to do that, but it’s possible,” he said.