Patrick Harker, president of the Federal Reserve Bank of Philadelphia, expects that the Federal Open Market Committee can keep the federal funds rate target range where it’s at.
“We have a restrictive stance, in my view, and we should keep it there for awhile,” he said in an interview on CNBC.
“Right now, I think we’ve probably done enough” in terms of raising rates.” He also pointed out that the Fed continues to shrink its balance sheet, which also tightens policy.
When asked about the economic trends where GDP growth is strong while inflation is receding, he said, “Where have we seen this before? Before the pandemic.” He added, “The same dynamics that were in play then can be in play now.”
Besides the Fed’s monetary policy tightening, banks are also tightening their lending. “There clearly is a tightening of credit,” he said. “How deep that goes, we don’t know yet.”
For the time being, Harker isn’t concerned by the surge in the 10-year Treasury yield (US10Y) (NASDAQ:TLT). “It could help cool the economy some… I’m not concerned about it right now, but it’s something I’m clearly watching.”
Earlier this month, Harker said the FOMC may be at a point “where we can be patient and hold rates steady.“
Traders agree with that assessment. They put an 82.5% probability on keeping rate the fed funds rate at 5.25%-5.50%, according to the CME FedWatch tool.