Central Banks

Wednesday, February 15, 2017 - 13:00

Philly Fed's Harker: Sees 3 Hikes As Appropriate This Year


--Forecasts GDP Growth 'A Touch Above 2%' This Year
--Employment 'Generally At Our Goal'
--Inflation 'On Track' to Goal, Could Reach 2% This Year or Next

WASHINGTON (MNI) - Philadelphia Federal Reserve Bank President Patrick Harker said Wednesday he expects three rate hikes this year will be appropriate, showing he is in line with the median expectations of the Fed's policymaking committee.

"I see three hikes as appropriate for 2017, assuming things stay on track," Harker said in remarks prepared for the Salle University 16th Annual Economic Outlook.

Harker, who is a voter this year on the Federal Open Market Committee, said "from an economic modeling standpoint, growth right now is more or less what we should consider normal."

As for the Fed's dual mandate, the former University of Delaware president said employment is "generally at our goal" and inflation is "on track" to meet its 2% target.

Inflation is still currently below the Fed's goal in their preferred measure, the personal consumption expenditures index, despite Tuesday morning's strong consumer price index showing core prices rose 2.3% year-over-year in January.

"In any event, we're starting to see upward movement on our goal," he said, "and I see inflation rising to meet our target sometime late this year or next, which means that we're essentially at our goal."

With the Fed close to its goals, "the issue now is growth," he said adding his forecast for GDP growth this year "is a touch above 2%."

But Harker warned of the limitation of monetary policy saying it is "not the all-powerful tool it's often portrayed as."

Monetary policy is "relatively limited in its scope, and it's a relatively blunt instrument," he said.

Thus the need for fiscal policies. While he avoided weighing into specific policy proposals like Fed Chair Janet Yellen has done in her testimony to Congress Tuesday and Wednesday, Harker said "investment in human and physical capital are vital."

Policies in "education, science, health, and the infrastructure of our cities and towns" contribute to growth and "help create a strong and diversified workforce and will help America keep its edge as a leader in innovation across sectors," he said.

--MNI Washington Bureau;tel: +1 202 371-2121; email: karen.mracek@marketnews.com

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