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Recent FedSpeak Highlights

  • Patrick Harker It’s more the firming of inflation that’s moved me from two to three.

    [ March 29, 2018 ]

    WSJ: How much of the change, then, from two to three [rate increases in the baseline projection] is because of the fiscal policy, the aggregate demand boost.

    MR. HARKER: For me, it’s more the firming of inflation that’s moved me from two to three. And again, if I see inflation continuing to move toward 2% and if it would accelerate, then I would consider even further increases. But again, I’d need to see the data before I make that decision.

  • Patrick Harker I’ve penciled in two hikes for 2018. I use pencil because the data can change, and sometimes they don’t accurately point to future events. Like when they predict a Patriots' Super Bowl win. 

    [ February 21, 2018 ]

    I’ve penciled in two hikes for 2018. I use pencil because the data can change, and sometimes they don’t accurately point to future events. Like when they predict a Patriots' Super Bowl win. The Fed’s mantra is data dependent, and for now, the data continue to tell me two is the likely appropriate path.

  • Patrick Harker I‘m open to a March rate increase.

    [ February 8, 2018 ]

    “I‘m open to a March rate increase,” he told reporters after a speech delivered at a meeting of the National Association of College and University Business Officers. He added he has “lightly pencilled” in two rate hikes for 2018 and could see a third one depending whether inflation rises further and financial conditions remain loose.

  • Patrick Harker [An] issue I’m watching is the yield curve, and I’m sure I’m not alone in this room. My assessment is that the worries so far have been inflated.

    [ January 12, 2018 ]

    [An] issue I’m watching is the yield curve, and I’m sure I’m not alone in this room. My assessment is that the worries so far have been inflated.

  • Patrick Harker My own view is that two rate increases are likely to be appropriate for 2018.

    [ January 5, 2018 ]

    Inflation continues to run below target, not just in the U.S. but in countries across the globe. Domestically, I expect inflation will run a bit above target in 2019 and come down to target the following year, but I am more hesitant in this view than I am on economic activity. If soft inflation persists, it may pose a significant problem, which I’ll get to shortly.

    For that reason, my own view is that two rate increases are likely to be appropriate for 2018.

    Of course, I’ll continue to monitor the data as they roll in, but that’s the view as we start out the new year.

  • Patrick Harker I would like to avoid any inversion of the curve, so my goal is to remove accommodation in a way that we do not run the risk of inverting the yield curve.

    [ November 13, 2017 ]

    I think there are a lot of likely suspects [for the flattening of the yield curve]. One is just simply that other banks the European Central Bank, Bank of Japan, others continue to be highly accommodative, and that is one of the reasons we're seeing the long end flatten out. I am concerned about that, and that's why the pace of removal of accommodation, to me, has to be gradual… I would like to avoid any inversion of the curve, so my goal is to remove accommodation in a way that we do not run the risk of inverting the yield curve.

    We're heading toward, in the forecast horizon, a Fed funds rate around 3 percent or so. That's our forecast. But again, we'll take our time to get there, and we'll do it in a very prudent fashion so that we don't disrupt that markets and we run their risk of inverting the yield curve.

  • Patrick Harker I have penciled in right now, in my SEP, three increases for 2018, but... some of the underlying numbers, like wage growth, job openings and hires, if we saw that that wasn’t translating to higher prices -- our dual mandate is very clear, it’s stable prices.

    [ November 8, 2017 ]

    I have penciled in right now, in my SEP, three increases for 2018, but I will reassess that as the data comes in, referring to the Fed’s Summary of Economic Projections. Some of the underlying numbers, like wage growth, job openings and hires, if we saw that that wasn’t translating to higher prices -- our dual mandate is very clear, it’s stable prices.

  • Patrick Harker From WSJ: Like most of his colleagues, Mr. Harker said he had penciled in one more rate increase this year in his economic forecast released following the September meeting. “I emphasize the word ‘pencil.”

    [ October 17, 2017 ]

    Like most of his colleagues, Mr. Harker said he had penciled in one more rate increase this year in his economic forecast released following the September meeting.

    “I emphasize the word ‘pencil,’” he said. “We have to see how inflation dynamics roll out over the next couple of months and we have to make sure that the process of ceasing reinvestment is, as we anticipate, not very disruptive to the market.”

    Mr. Harker said he has also penciled in three rate increases in 2018.

    “There’s no need to firmly commit” to raising rates again this year, Mr. Harker said. “We just have to see how it evolves.”

  • Patrick Harker On a national level, there’s very little slack left in the labor market.

    [ October 17, 2017 ]

    On a national level, there’s very little slack left in the labor market.

  • Patrick Harker From CNBC: Patrick Harker said Friday he still has "penciled in" an interest rate hike in December, and three more rate hikes next year, despite weak inflation.

    [ September 29, 2017 ]

    Patrick Harker said Friday he still has "penciled in" an interest rate hike in December, and three more rate hikes next year, despite weak inflation.

    "Labor markets feel really tight," Harker said at a conference in Philadelphia on Fintech, adding that it was appropriate for the Fed to take a pause for now in raising rates as it begins to shrink its $4.5 trillion balance sheet.

  • Patrick Harker Let’s start the process of ceasing reinvestment. Let’s see how the market reacts to that, and then consider the third rate increase this year—whether that occurs or not.

    [ July 11, 2017 ]

    “Let’s start the process of ceasing reinvestment,” he said. “Let’s see how the market reacts to that, and then consider the third rate increase this year—whether that occurs or not.”

    Mr. Harker also said the exact timing of the central bank’s balance-sheet wind-down hasn’t been decided, but he “fully expects” it to start this year.

  • Patrick Harker I’m sticking to my outlook that we’re on the right path, but I’m adjusting my view slightly on meeting our inflation goal from the end of 2017 to the beginning of 2018.

    [ June 27, 2017 ]

    I’m sticking to my outlook that we’re on the right path, but I’m adjusting my view slightly on meeting our inflation goal from the end of 2017 to the beginning of 2018. This is the advanced economic practice of “hedging one’s bets.”

  • Patrick Harker I can definitively say that [the normlization process] will be boring.

    [ May 23, 2017 ]

    There are different options under discussion, but we’re looking for a normalization process that is gradual and essentially on autopilot. If something happens, of course we’ll intervene, but we fundamentally want to push the start button and leave it to churn slowly away. We’ll still discuss the balance sheet in meetings, but if things are good, we’ll leave it to gradually unwind in the background.

    And we’ll let you know. I can say with absolute certainty that markets will get a heads up with a good amount of time.

    I can also definitively say that it will be boring. It will be the policy equivalent of watching paint dry. Fed presidents had a brief encounter with people finding us interesting over the past few years. Now we’re headed back to the natural state of things, where people try to avoid getting stuck next to us at dinner parties.

    The funds rate will be our primary monetary policy tool, and we’ll keep the unconventional ones in the arsenal in case we need to use them again, which I hope we won’t.

  • Patrick Harker I thinkJune should be a live meeting, for sure. We'll get more data between now and June. The only issue is the way inflation — where is it going? We're getting mixed signals on that right now. But I remain pretty confident we are close to our 2% target, and that if we don't see a deceleration of inflation but continued growth in inflation, I think June is a distinct possibility.

    [ May 16, 2017 ]

    One of my colleagues has an interesting phrase for describing the current mood of the economy: "awkward optimism." What he means by that is, if you look at all the surveys, whether it's consumer confidence, or business confidence, or whether it's at the national level, or our own manufacturing or nonmanufacturing business outlook — there's lots of confidence. But that confidence needs to translate into action, and there's still a little bit of hesitation. I want to be optimistic, I want to believe that we're going to get, say, tax policy change — but I'll wait...

    I think [June] should be a live meeting, for sure. We'll get more data between now and June. The only issue is the way inflation — where is it going? We're getting mixed signals on that right now. But I remain pretty confident we are close to our 2% target, and that if we don't see a deceleration of inflation but continued growth in inflation, I think June is a distinct possibility.

  • Patrick Harker I'm not completed wedded to thinking two more rate rises will be enough for this year.

    [ May 12, 2017 ]

    Things are pretty balanced, but there is a potential we have to accelerate the path" of rate increases if, for example, elected leaders were to find their way toward stimulative taxation and spending policies, or if wages were to heat up in a way that would drive inflation up more quickly than projected.

    "I'm not completed wedded" to thinking two more rate rises will be enough for this year, Mr. Harker said. 

    ...

    On the hiring front, Mr. Harker said, "We're looking at a labor market more or less at full health, with very little slack." He said what is now a 4.4% jobless rate is likely to ebb to 4.2% by the end of 2018.

    What is likely to be a 200,000 average monthly jobs gain this year should cool to a 100,000 average next year, he said, adding that slowing shouldn't be a problem. "To sustain a healthy economy, estimates of the ideal number range from about 70,000 to 100,000 a month to keep up with population growth," Mr. Harker said. 

  • Patrick Harker We have to balance [our reduction of the Fed’s balance sheet] off the path of the fed funds rate. As we cease reinvestment it will remove some accommodation. These two things are related.

    [ April 3, 2017 ]

    "Possibly by the end of this year or the beginning of next year would be an appropriate time to stop reinvesting (maturing assets), but that's all dependent on how the economy evolves between now and then," Harker told reporters in Philadelphia.

    "We have to balance this off the path of the fed funds rate. As we cease reinvestment it will remove some accommodation. These two things are related," Harker added, reinforcing the similarly growing view that the Fed could temporarily pause interest rate hikes when it starts the portfolio process.

    Harker said it was unclear how much the Fed should shrink the portfolio. But he supports a "Treasury-heavy" portfolio in the future, adding that the Fed may not dump all of its nearly $2 trillion in mortgage-backed securities.

  • Patrick Harker For me, we should wait until we’re well north of 1% [before addressing the balance sheet].

    [ March 20, 2017 ]

    CNBC: Is the Fed currently discussing a plan for its balance sheet?

    HARKER: Yeah, we are discussing it.  For me, we should wait until we’re well north of 1% [before addressing the balance sheet].

    CNBC: Can I nail you down a little bit on that?  Is “well north” of 1% 1 ½%?

    HARKER: Somewhere in that range… I don’t know yet.

  • Patrick Harker I see three hikes as appropriate for 2017, assuming things stay on track.

    [ February 28, 2017 ]

    I see three hikes as appropriate for 2017, assuming things stay on track.

  • Patrick Harker I would not take March off the table at this point. We'll have to see how it plays out in the next few weeks.

    [ February 20, 2017 ]

    "I would not take March off the table at this point. We'll have to see how it plays out in the next few weeks," he told Market News International in an exclusive interview Friday. "I don't think we're behind the curve now, but it is something I am worried about."

    ...

    "Since you can't forecast perfectly, I am very supportive of a gradual path of removing accommodation, but gradual means we have to keep moving along the path," Harker said.

    The Fed has stated its inflation goal is symmetric, so an overshoot of somewhere around 50 basis points on either side of 2% is "fine," Harker indicated, though it's less about the hard numbers and more "what you're feeling in terms of the momentum. If you're starting to feel it's accelerating, then you have to take action."

    A near-term litmus test for that momentum is the PCE report due out March 1, he said.

  • Patrick Harker I see three hikes as appropriate for 2017, assuming things stay on track.

    [ February 15, 2017 ]

    I see three hikes as appropriate for 2017, assuming things stay on track.

  • Patrick Harker I think March should be considered as a potential for another 25-basis point increase.

    [ February 6, 2017 ]

    "I still am supportive of three rate hikes this year, of course with a major caveat, depending on how the economy evolves and policy, fiscal policy, evolves," Harker told reporters after a speech on the regulation of fintech firms." I think March should be considered as a potential for another 25-basis point increase."
    ...
    "I don’t think we are behind the curve now," Harker added. "I want to make sure we don’t get behind the curve."

  • Patrick Harker I see three modest hikes as appropriate for the coming year, assuming the economy stays on track. Fed policymakers enjoy saying we’re data-dependent and this is an area where that rings especially true.

    [ January 20, 2017 ]

    After December’s meeting, that makes a brisk average of one 25-basis-point hike per year for the last two years.

    But I see three modest hikes as appropriate for the coming year, assuming the economy stays on track. Fed policymakers enjoy saying we’re data-dependent and this is an area where that rings especially true.

    I’ve said it before, and it’s worth repeating, that monetary policy is a fairly limited set of tools with a fairly limited reach. We will respond to changes in the economy with moves in the federal funds rate, and we can do a very good job of creating the conditions that are consistent with economic growth. But the kinds of policies that will deliver that growth — employment programs, development, taxation, and trade policies — are up to elected officials at the local, state, and national levels.

  • Patrick Harker When we are at or above 100 basis points - and we are moving toward that - I think it is time to start serious consideration of first stopping reinvestment and then over a period of time unwinding the balance sheet.

    [ January 12, 2017 ]

    "When we are at or above 100 basis points - and we are moving toward that - I think it is time to start serious consideration of first stopping reinvestment and then over a period of time unwinding the balance sheet," Harker, who has a vote on monetary policy this year, told reporters. He was referring to the fed funds rate for interbank lending which the central bank tries to guide.

  • Patrick Harker I’m penciled in for three increases next year, however, that’s subject to a lot of uncertainty.

    [ January 6, 2017 ]

    "I’m penciled in for three increases next year, however, that’s subject to a lot of uncertainty,” referring to the current lack of clarity over Trump’s future fiscal proposals.

    Speaking on Sirius radio Friday, he said “as the policy uncertainty resolves itself, we’ll be able to see whether it’s 3, 2, 4.” Harker is also an FOMC voter this year.

  • Patrick Harker I do think the market is possibly underestimating the rate of normalization, but we’ll see, right?

    [ October 26, 2016 ]

    WSJ: What do you think the dynamic is between financial markets and the Fed right now? Is it – is it a healthy dynamic? Or is there – is there a problem?

    HARKER: I don’t think there’s a problem. I do think the market is possibly underestimating the rate of normalization, but we’ll see, right?

    And part of the challenge is, when it comes to communication, the dot plots are all forecasts, but people take the path of the Fed funds rate as a policy statement, not as a forecast. And we have not made that clear, right? We’re asked to forecast what we think the Fed funds rate will be. That’s a different question than saying, you know, what will the Fed funds rate be? And so that one dot plot I think causes us some problems when it comes to communication.

  • Patrick Harker It may be that our toolbox is getting duller: Recent studies have found that monetary policy’s efficacy has been waning since the mid-1980s, and that this can be linked to the aging of the population.

    [ October 13, 2016 ]

    A lower natural funds rate has implications for the speed at which current monetary policy should normalize. The lower the natural funds rate, the closer the current funds rate will be to that level, which means policy will have a shorter distance to travel to full normalization. That’s important because it gives us less room to maneuver. Monetary policy is a relatively blunt tool; a smaller window for operation is more appropriate for a scalpel.

    And it may be that our toolbox is getting duller: Recent studies have found that monetary policy’s efficacy has been waning since the mid-1980s, and that this can be linked to the aging of the population. Given our demographic realities, this puts even more pressure on fiscal and other policies to take a long-term look at policies that can nurture growth.

  • Patrick Harker “What I’m worried about is, depending on the outcome of the election and what happens after that, if there are policies that would have distortive effects that we would have to respond to.”

    [ October 13, 2016 ]

    “What I’m worried about is, depending on the outcome of the election and what happens after that, if there are policies that would have distortive effects that we would have to respond to,” he told reporters Thursday after giving a speech in Philadelphia. In that case, “it may be prudent -- and I emphasize may be prudent -- to wait until we resolve some of that uncertainty,” he said.
    ...
    “I do think sooner rather than later is appropriate,” he said. “I don’t think that we should take any meeting off of the table, but I am worried about some of the risks that we face.”

  • Patrick Harker BLOOMBERG: As a modeler, would you get rid of the dot plot? HARKER: I’m not sure. I think it does provide value, and you need to think of lots of ways to communicate and be transparent. It does provide that. It’s really the interpretation of that particular dot plot, not for GDP or inflation, because people understand that’s our forecast. The one I worry about is the fed funds rate dot plot.

    [ September 29, 2016 ]

    BLOOMBERG: Do you think the central bank has a communications problem, particularly with Wall Street, because you have forecast a lot of interest rate moves that haven’t happened?

    HARKER: I think one of the fundamental problems we’ve had is that in the SEP – the dot plot – the path of the fed funds rate is often taken as some sort of commitment as opposed to our best guess or estimate of what will happen. And I think that’s been a communications issue, that it really isn’t saying this is exactly what we’re going to do. It’s saying given what we know today, this is our best estimate of where that will be, assuming that proper policy is followed.

    BLOOMBERG: As a modeler, would you get rid of the dot plot?

    HARKER: I’m not sure. I think it does provide value, and you need to think of lots of ways to communicate and be transparent. It does provide that. It’s really the interpretation of that particular dot plot, not for GDP or inflation, because people understand that’s our forecast. The one I worry about is the fed funds rate dot plot.

  • Patrick Harker I tend to be in the camp of normalizing sooner rather than later.

    [ September 29, 2016 ]

    “I tend to be in the camp of normalizing sooner, rather than later,” he said Thursday in Dublin during an interview on Bloomberg Television with Michael McKee. He said the Fed was making progress toward its target for 2 percent inflation and “I am somewhat concerned about falling behind the curve,” he said.

    ...

    Harker, who became president of the Philadelphia Fed in July 2015 and will vote on policy next year, said that every FOMC meeting was “live” for a policy decision. “To take any meeting of the table is a mistake,” he said.

  • Patrick Harker “If things continue on the trajectory that I anticipate, December would be an appropriate time for a rate increase,”

    [ September 29, 2016 ]

    “If things continue on the trajectory that I anticipate, December would be an appropriate time for a rate increase,” Mr. Harker said. He was speaking to reporters after an address at an event hosted by the Global Interdependence Center, a U.S. think tank that promotes free trade.

  • Patrick Harker I anticipate that it may be appropriate for up to two additional rate hikes this year and that the funds rate will approach 3.0 percent by the end of 2018.

    [ July 13, 2016 ]

    Considering the [Philadelphia Fed’s] economic projections, I anticipate that it may be appropriate for up to two additional rate hikes this year and that the funds rate will approach 3.0 percent by the end of 2018.

  • Patrick Harker I can easily see the possibility of two or three rate hikes over the remainder of the year

    [ May 23, 2016 ]

    Although I cannot give you a definitive path for how policy will evolve, I can easily see the possibility of two or three rate hikes over the remainder of the year. That said, all forecasts are subject to fairly wide confidence bands, and mine is no exception.

  • Patrick Harker Consistently below-target outcomes will eventually lead to a lack of credibility for our 2 percent goal. Hence, it may be worth erring on the side of accommodation to ensure against that outcome.

    [ April 12, 2016 ]

    So far, survey evidence, like that obtained from the Philadelphia Fed’s Survey of Professional Forecasters, does not indicate any unanchoring of inflation expectations. However, market-based measures are showing that investors are seeking less compensation for inflation. But there are downside risks to my baseline forecast. In particular, we have been below our inflation target for all but two years since 2008. Consistently below-target outcomes will eventually lead to a lack of credibility for our 2 percent goal. Hence, it may be worth erring on the side of accommodation to ensure against that outcome.

  • Patrick Harker I am not a two rate-hike person. I'd rather see more (this year).

    [ March 22, 2016 ]

    Philadelphia Fed President Patrick Harker, a relatively new addition to the U.S. central bank, said that while he supported last week's decision by his colleagues to leave policy unchanged, "there is a strong case that we need to continue to raise rates."

    "I think we need to get on with it," said Harker... "This economy is really quite resilient to a lot of the headwinds (including the strong dollar), so if that continues I would be supportive of another 25 basis point rise."

    "I am not a two (rate) rise person. I'd rather see (more hikes this year)," he added.

    That puts Harker in the hawkish camp of Fed officials, even though last month he urged patience and said more hikes could come in the second half of the year.

    ...

    "Barring some unforeseen headwinds which are always possible, then I think it's appropriate to consider every meeting live ... and to consider another 25 basis-point rise" if employment and job growth improves and core inflation rises as they recently have, he said.

    I am not a two rate-hike person. I'd rather see more (this year).

  • Patrick Harker Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike.

    [ February 16, 2016 ]

    It is also fair to say that the risks to my outlook are tilted to the downside. The nervousness in the financial markets and the increased caution that it may cause for economic decision-makers, both households and firms, could imply somewhat slower growth, at least in the first half of the year.

    Also, inflation is not likely to pick up substantially until the second half of the year, although, for the reasons I have discussed, I remain confident that inflation will move toward the Committee’s long-run objective of 2 percent.

    These considerations make me a bit more conservative in my approach to policy, at least in the very near term. Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike. Thus, I am approaching near-term policy a bit more cautiously than I did a few months ago. That is part of being data dependent. And attentiveness to the data will be a key factor in all of my future policy recommendations as well. If financial headwinds dissipate quickly and inflation picks up a bit more aggressively, it will require a slightly more aggressive approach to policy.

    I believe as we move into the second half of the year with economic activity growing at trend or slightly above trend, the unemployment rate below its natural rate, and price pressures starting to assert themselves, policy can truly normalize. I mean this in the sense that we can move away meaningfully from the zero lower bound and that our reaction to incoming data can return to a more historical pattern.