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Fed's Harker makes case for one rate hike in 2019 and another in 2020

By Alexander Bueso

Date: Thursday 28 Feb 2019

Fed's Harker makes case for one rate hike in 2019 and another in 2020

(Sharecast News) - One of the US central bank's top officials extolled the virtues of patience when setting monetary policy, even as he argued in favour of additional rate hikes - albeit very gradually.
"With a temperate climate for inflation; continued strength in the labor market; very slight downside risks; solid, but moderate growth projections for the next couple of years; and, of course, a climate of uncertainty, I continue to be in wait-and-see mode," Philly Fed chief, Patrick Harker said in remarks prepared for a speech.

According to Harker, short-term official interest rates in the US will most likely need to rise by another 25 basis points in 2019, followed by another such increase during the following year, he said.

Core inflation running "slightly" above 2.0%, as he expected would happen over the next two years, was not a concern, the policymaker added.

What does matter, is the trajectory that inflation is on, that is to say, which was is it going and how fast.

"Right now, we're not seeing significant upward pressure, and it's not on an accelerated path; if anything, it's edging slightly downward. If that scenario changes, the data will guide my views."

Harker, who was not a vote-wielding member of the Federal Open Market Committee in 2019, pegged US GDP growth at "a bit above" 2% in 2019, before easing back to around 2% at some point over the course of 2020.

Yet while private consumption remained strong, businesses were increasingly uneasy, the central banker said.

"Businesses, on the other hand, have reported an increase in uncertainty and a decrease in confidence.

"Coupled with tighter financial conditions, the investment outlook is not quite as rosy as last year. It's certainly not a dire one, but the specter of uncertainty does cast a shadow, and the ambiguity of the current climate appears to be having a dampening effect."

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