Fed's Harker: Expects Fed to cut rates once in 2024

Patrick Harker, President of the Federal Reserve Bank of Philadelphia and a voting member of the Federal Open Market Committee (FOMC) in 2026, recently shared his views on the current economic situation and future monetary policy at an event in Philadelphia. Harker stated that although the inflation report in May was "reassuring," the Federal Reserve still needs more evidence to be confident that inflation is steadily moving towards the 2% target. Harker emphasized that based on his baseline forecast, if the economic situation meets expectations, he believes that a rate cut before the end of the year would be appropriate. However, he also cautioned that given the uncertainty in the economy, there is also a possibility of two rate cuts or no rate cuts by the Federal Reserve in 2024, with decisions entirely dependent on future economic data. Harker further explained that if the data in the coming months continues to show inflation moving in the right direction, he would consider supporting a rate cut. However, he also pointed out that it is not yet time to take action, urging caution and hoping to see further improvement in inflation in the coming months. It is worth noting that although Harker is open to rate cuts in 2024, he is not involved in monetary policy voting decisions this year. Last week, Federal Reserve officials decided to keep the benchmark interest rate at a two-decade high and reduced their expectations for rate cuts in 2024. According to the latest median forecast, policymakers now anticipate only one rate cut this year, down from the three rate cuts forecasted in March. Harker's outlook on interest rates aligns with the median forecast. He expects economic growth to slow but remain above trend levels, while the unemployment rate will rise moderately. He believes that achieving the Federal Reserve's inflation target will be a long-term adjustment process. Despite not having voting rights on monetary policy this year, Harker still believes that the current level of interest rates is sufficient to continue lowering inflation. He stated that the current policy rate has remained unchanged for nearly 11 months and is expected to remain effective for a longer period, helping the Federal Reserve maintain a tightening stance to achieve its inflation target and mitigate upside risks. In conclusion, Harker stated that keeping the policy rate unchanged and waiting for more economic data is reasonable. He needs to remain cautious and hopes to observe more data in the coming months, noting that the biggest concerns for businesses are capital costs and uncertainty. He also mentioned that the U.S. job market is far from reaching a state of "substantial deterioration," and while global interest rates are all declining, the pace varies