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Harker Favors Higher Rates for Inflation Control

Philadelphia Fed President Patrick Harker believes the Federal Reserve can control inflation without causing a recession.

Patrick Harker, Federal Reserve Bank of Philadelphia President
Patrick Harker, Federal Reserve Bank of Philadelphia President

He suggests more 25 basis-point increases to get the key interest rate above 5%. Harker says the Fed needs to get above 5% and then pause, though how much above remains to be seen.

Prudent Approach to Soft Landing

Last week, the Fed lifted its benchmark interest rate to a range of 4.5% to 4.75% after a quarter-point increase in December and four 75 basis-point hikes before that. Policymakers in December estimated rates peaking at 5.1% this year, which will be updated next month.

Federal Reserve Chair Jerome Powell said further rate hikes would be needed to suppress inflation. Investors have adjusted their projections following the strong January employment report to align with the policymakers.

Harker believes the Fed can take its time and observe how things play out if inflation continues on its current trajectory. The central bank aims to ease inflation to its 2% target, but prices have risen 5% in the past 12 months.