FED to Hold Rates Steady: The Federal Reserve is poised to adopt a stance of maintaining current interest rates, buoyed by signs of abating inflationary pressures. Philadelphia Federal Reserve Bank President Patrick Harker indicated on Tuesday that, based on recent favorable economic indicators and discussions with banks, the central bank might be entering a phase where it can allow the impact of prior rate increases to gradually mitigate inflation.
Harker’s sentiment aligns with his observations that have been shaped by positive dialogues with financial institutions and encouraging economic metrics. “Barring any unforeseen alarming developments over the next few weeks, it is my belief that we stand at a juncture where we can exercise patience and refrain from altering interest rates. Instead, we can let the cumulative effects of our monetary policy measures unfold,” Harker conveyed during a speech delivered in Philadelphia.
The Federal Reserve recently implemented a rate hike, pushing the range to 5.25%-5.5%, a decision thought to be the first in a sequence of two rate increases earmarked for the latter half of 2019. Harker emphasized that the central bank is making headway in curbing inflation. Supporting his assertion, he referenced the most recent reading of the Fed’s Personal Consumption Expenditures (PCE) Price Index, which indicated a 3% increase in inflation. When discounting the influence of volatile food and energy prices, the rise amounted to 4.1%.
FED to Hold Rates Steady: “We are achieving incremental success in our pursuit of curbing inflation. While this progress has been gradual, I am attuned to any potential resurgence of inflationary pressures. Our resolve remains firm in restoring inflation to our target level,” Harker emphasized.
Ahead of an upcoming Fed meeting in September, several vital economic reports will emerge. Harker anticipates that core PCE inflation will gradually recede, dipping below 4% by year’s end and further reducing to sub-3% levels in 2020. By 2025, Harker envisions stability, with inflation converging at the Fed’s designated 2% target.
Anticipating a marginal uptick in unemployment, Harker affirmed that the Federal Reserve will adopt a watchful approach, preferring to maintain prevailing rates for a considerable duration. “While the lessons of the pandemic underline the need for flexibility, I don’t foresee any immediate scenarios that would necessitate an abrupt policy rate adjustment,” he added.
The current outlook projects the Federal Reserve’s commitment to orchestrating a controlled and gradual economic deceleration. In summation, it appears that the Federal Reserve is embracing a stance of preserving unchanged interest rates while allowing previous rate increments to foster a reduction in inflation rates. However, the Federal Reserve remains vigilant, awaiting forthcoming economic insights before making any determinations regarding prospective rate adjustments.
