Date
29 May 2017
The Federal Reserve should consider a rate hike in March if growth in jobs and wages continues, according to a senior official. Photo: Reuters
The Federal Reserve should consider a rate hike in March if growth in jobs and wages continues, according to a senior official. Photo: Reuters

Fed’s Harker says March rate hike should be considered

Philadelphia Federal Reserve Bank President Patrick Harker is open to raising interest rates again at the US central bank’s March meeting if growth in jobs and wages continues, Reuters reports.

“I still am supportive of three rate hikes this year, of course with a major caveat, depending on how the economy evolves and policy, fiscal policy, evolves,” Harker told reporters after a speech on the regulation of fintech firms.

“I think March should be considered as a potential for another 25-basis point increase.”

The Fed raised rates for only the second time since the financial crisis in December, and most Fed policymakers agree with Harker that three more rate hikes this year would be appropriate. Wall Street banks and interest-rate futures traders are betting the Fed will only lift borrowing costs twice this year, starting in June.

Harker, one of 10 voters this year on the Fed’s rate-setting panel, said that to support a rate hike, he would need to see further GDP growth and continued strengthening of the labor market, “not just in terms of the job numbers but also seeing continued wage growth and income growth because that will ultimately feed into inflation.”

US employers added more jobs last month than expected, but hourly wages increased by only three cents, suggesting there is still room for the job market to improve before there is much upward pressure on prices.

“I don’t think we are behind the curve now,” Harker added. “I want to make sure we don’t get behind the curve.”

Harker tread carefully when it came to questions about how policies under President Donald Trump might affect the economy. He said he had not seen enough details of the new administration’s tax or infrastructure plans to make any judgment about how they would impact growth.

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