Fed's Harker sees interest rate “well above 4 percent by the end of the year”
20.10.2022, 16:29

Fed's Harker sees interest rate “well above 4 percent by the end of the year”

Philadelphia Fed President Patrick Harker said on Thursday they are not done with raising its short-term interest rate target amid very high levels of inflation, as reported by Reuters. He added the Fed will find space “next year to pause the tightening process”. According to him, the interest rate will be above 4% by the end of 2022.

Additional takeaways

“We have also raised the federal funds rate 300 basis points since the start of 2022. That means the Fed is actively trying to slow the economy. But we are going to keep raising rates for a while.”

“Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4 percent by the end of the year.”

“The Fed is actively trying to slow the economy.”

“”We are going to keep raising rates for a while.”

“Sometime next year, we are going to stop hiking rates. At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work. It will take a while for the higher cost of capital to work its way through the economy.”

“Inflation will come down, but it will take some time to get to our target. I expect PCE inflation to come in at around 6 percent in 2022, around 4 percent next year, and 2.5 percent in 2024.”

Market reaction

After a decline following the beginning of the American session, the US Dollar trimmed losses. The DXY bottomed at 112.16 and as of writing, trades at 112.62, down by 0.25% for the day.

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