Patrick Harker, Speech: The Fed and the Economy, Where We’re Going, Where We’ve Been

Fed Funds

“But rates are now at a level that allow us to slow down and proceed cautiously and, to my mind, the days of us raising 75 basis points at a time have surely passed. Just at the last meeting, I voted for a hike of 25 basis points — what some would call slow but actually is closer to cruising speed when it comes to tightening. In my view, we are not done yet, but we are likely close … At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work.”

Inflation

“We are finally starting to see steady progress bringing inflation down across an array of goods. 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 — well over our 2 percent target, but 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 modestly above 4 percent this year. It’s an underrated advantage that the Federal Reserve is taking on inflation from a position of such labor market strength.”

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