Philadelphia Federal Reserve Bank President Patrick Harker has underscored the importance of maintaining the federal funds rate at its current level, within the 5.25% to 5.5% target range. His remarks were made on Monday during a Philadelphia banking conference and at the Mortgage Bankers Association Annual Convention.
Harker emphasized the economy's resilience and its better-than-expected adjustment to the current rates. He pointed out an ongoing disinflation process and a stabilizing labor market as key indicators of this resilience.
In his address, Harker acknowledged the impact of higher rates on the mortgage market, stating, "There are no first-time homebuyers". He also recognized calls for more time to adapt to these rates. Despite these challenges, he reaffirmed that achieving a 2% inflation remains the Federal Reserve’s primary objective.
Harker expressed confidence in maintaining steady interest rates unless there's a significant alteration in economic data or stakeholder feedback. Echoing other Fed representatives' sentiments, he anticipates rates staying "higher for longer."
On the topic of economic growth, Harker predicted GDP growth throughout 2023 before a moderation in 2024, which he does not interpret as an impending recession or economic contraction. He anticipates the unemployment rate to rise slightly to 4% by the end of 2023, peak at around 4.5% in 2024, but then revert to 4% in 2025.
While acknowledging potential increases in unemployment, Harker does not foresee widespread layoffs. He attributes potential unemployment changes to factors like technological change, workforce influx, child care issues, and immigration.
Harker concluded by advocating for a steady policy rate informed by both hard data and anecdotal evidence. These concerns and perspectives will be reviewed in the next Federal Open Market Committee (FOMC) meeting scheduled from Oct. 31 to Nov. 1.
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