ISTANBUL
The head of the Philadelphia Federal Reserve signaled Tuesday that the US central bank is close to holding interest rates steady.
“We are making progress against inflation. It has been slow progress, and I am watchful of any reemerging price pressures,” Patrick Harker said in a speech in the northeastern city.
“Ten days ago, the latest PCE inflation report showed continued disinflation year over year on the headline measure and promise on the core measure,” he added, referring to the official personal consumption expenditures price index, which rose 4.1% annually in June, down from 4.6% in May.
“I expect core PCE inflation to decline to a rate perhaps just below 4% year over year by the end of 2023, before falling below 3% next year and leveling out at our 2% target in 2025,” said Harker.
“Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work,” he added.
Harker said the Fed can achieve a “soft landing” – when the central bank tames inflation without slowing down the economy too much or pushing unemployment too high.
“I expect only a modest slowdown in economic activity to go along with a slow but sure disinflation,” he added.
The Fed last month raised its benchmark interest rate by another 25 basis points, carrying the target range for the federal funds rate between 5.25% and 5.5% – the highest in more than 22 years.
