Federal Reserve Bank of Philadelphia President Patrick Harker warned on Thursday that the pace of inflation progress in the U.S. economy has slowed, underscoring the need for a patient approach to monetary policy. His remarks come ahead of the highly anticipated Personal Consumption Expenditures Price Index (PCEPI) report, expected to show renewed inflationary pressure.
Key Highlights:
The current policy rate remains restrictive, applying downward pressure on inflation.
Harker emphasized that the Fed follows data closely and will act if necessary.
Despite inflationary challenges, he remains optimistic about the overall economic outlook.
He cautioned against making policy adjustments based on one month of data.
In December, Harker was undecided between one or two rate cuts for 2024 but now favors holding rates steady amid heightened uncertainty.
Consumer sentiment surveys suggest rising nervousness over inflation expectations.
Shelter inflation is expected to ease, contributing to broader disinflation.
Harker expressed skepticism about the sustainability of recent productivity gains.
Market Outlook:
Harker’s comments reinforce the Fed’s cautious stance, signaling that rate cuts are unlikely in the near term unless inflation shows consistent progress toward the 2% target.
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