Patrick Harker, Speech: Inflation, What Caused It and What to Do About It

“We have also raised the federal funds rate 300 basis points since the start of 2022. That means the Fed is actively trying to slow the economy. But we are going to keep raising rates for a while. Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4 percent by the end of the year. “

”Sometime next year, we are going to stop hiking rates. At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work. It will take a while for the higher cost of capital to work its way through the economy.”

“I expect that economic growth will moderate this year as both inflation and tightening financial conditions begin to crimp consumption. Overall, I forecast flat GDP growth for 2022, 1.5 percent growth in 2023, and around 2 percent growth in 2024.”

“Inflation will come down, but it will take some time to get to our target. I expect PCE inflation to come in at around 6 percent in 2022, around 4 percent next year, and 2.5 percent in 2024.”

“Turning to the job market, the unemployment rate should peak next year at 4.5 percent as financial conditions bite. It should then fall to 4 percent in 2024, which suggests that even as we tighten monetary policy, labor markets will stay quite healthy.”