Patrick Harker, Speech: Economic Outlook and the Anchor Economy Initiative

Fed Funds & 25bps or 50bps

“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed. In my view, hikes of 25 basis points will be appropriate going forward.”

Inflation

“But there’s more good news: We are starting to see inflation come down across a spectrum of goods. And so, with monetary policy doing its work, supply chains healing, and excess demand running off, I forecast core inflation to come in at around 3.5 percent this year. I want to be clear: This is well over our 2 percent target. But it is suggestive of clear movement in the right direction. Core inflation should fall to 2.5 percent in 2024 and then back down to 2 percent in 2025.”

GDP

“GDP growth will be modest, but I’m not forecasting a recession. The labor markets are simply too hot to indicate a significant downturn at this point. I expect real GDP growth of about 1 percent this year before climbing back up to trend growth of about 2 percent in 2024 and 2025.”

Jobs

“Lastly, I do think we will see a very slight uptick in unemployment, probably topping out at about 4.5 percent this year, before falling back toward 4 percent over the next two years. It’s an underrated advantage that the Federal Reserve is taking on inflation from a position of such labor market strength.”