Harker of the Fed: My Expectation is for One Interest Rate Reduction This Year

Harker stated in prepared remarks to an event hosted by the regional central bank in Philadelphia, "If all of it happens to be as forecasted, I think one rate cut would be appropriate by the end of the year." He had previously outlined his perspective, which includes a "long glide" back to the inflation target, a modest increase in the unemployment rate, and slowing but above-trend economic growth.

The U.S. central bank maintained interest rates in the 5.25-5.50% range at its policy meeting last week in order to maintain economic pressure and reduce inflation to the Fed's 2% target rate. In April, the Federal Reserve's preferred inflation indicator indicated an annual rate of 2.7%.

Harker stated that the Consumer Price Index reading from last week was "extremely appreciated." However, the progress on inflation thus far this year has been modest, and he must analyze additional data in the upcoming months to make a decision, given the general uncertainty.

Harker also stated that the Fed's policy rate must remain unchanged for the time being in order to mitigate potential upside risks, including the persistently high rate of inflation in the services sector, particularly auto insurance and maintenance, and the potential long-term tenacity of elevated shelter inflation.

Nevertheless, Harker did not rule out the possibility of altering his stance on rates as additional economic data is analyzed. "I see two cuts, or none, for this year as quite possible if the data break one way or another...we will remain data dependent," according to him.

The median forecast among the Federal Reserve's 19 policymakers at the most recent policy meeting was for a single interest rate cut this year, whereas financial markets presently anticipate two rate cuts by the end of the year.