The U.S. central bank likely won’t raise its policy rate until 2023, said Philadelphia Fed President Patrick Harker on Wednesday.
In an interview with Yahoo Finance, Harker was asked about the bond market starting to price in the first Fed rate hike next year.
“I can only speak for myself… I’m not looking at a hike anytime in 2022,” Harker said. “I mean we’ve got a long ways to go.”
“There is so much uncertainty still in the economy. Let’s climb out of this pandemic and then see where we go,” the Philadelphia Fed president said.
Harker forecast economic growth in the 4% range in 2021, with the unemployment rate falling to around 5% from its 6.3% level in January.
Harker said inflation will come in at a 1.7% annual rate, still below the Fed’s 2% longer-run target.
“We are climbing out of this situation, it is going to be bumpy,” he added.
Harker said his forecast only assumed a $900 billion stimulus package.
Asked if he was worried that the larger package under consideration in Congress would lead to overheating, Harker said he saw no signs that inflation is running out of control.
If inflation rises slightly above 2%, that is “more than acceptable,” he said.
Asked if the Fed might need to push down longer-term interest rates, Harker said the Fed has its asset-purchase program and yield-curve control as tools if needed.
But Harker displayed no willingness to take any additional easing steps.
“At this point, I am firmly committed to holding where we are. When you are in the middle of the crisis, the fewer things you can change, the better,” he said.
Earlier Wednesday, Chicago Fed President Charles Evans said markets need to understand the Fed is committed to seeing inflation move higher.
The central bank’s Beige Book survey found few signs of inflation pressure.
Stocks moved lower Wednesday as interest rates rose. The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y 0.00% rose 6 basis points to 1.47%. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% lost 119 points while the tech-heavy Nasdaq index /zigman2/quotes/210598365/realtime COMP +0.88% lost 361 points.