Based on how inflation and the U.S. economy are going now, the head of the Philadelphia Federal Reserve said Monday that one drop in interest rates “would be appropriate by year’s end.”
In a speech in Philadelphia, Patrick Harker said that the Federal Reserve is still “surrounded by an air soaked with uncertainty” about how inflation will move in the future.
The Fed and Wall Street SPX DJIA were shocked when prices went through the roof in the first four months of the year. Prices then started to slow down a bit in May.
Harker said that “more data is essential,” even though the most recent reports on inflation were positive.
Last week, the Federal Reserve kept a key short-term interest rate at its highest level in 23 years.
Before they are sure that inflation is slowing down enough to reach the central bank’s 2% goal, top officials want it to slow down even more.
The most recent data on retail and consumer prices showed that inflation stopped rising in May.
Harker is one of several top central bankers who said this year there might only be one rate cut. But some people think that two cuts might be necessary if inflation goes down a little faster than expected.
Harker did say that he is open to other ideas, though.
“It’s possible that there will be two cuts or none this year, depending on how the data breaks,” he said. “That being said, we will still depend on data.”
The Fed committee that sets the main short-term interest rate in the U.S. does not have Harker as a voting member this year.
