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relates to Rates Traders Are Left With Questions as Fed Signals End to Runoff relates to Fed Hints a Bias Toward Hiking Endures as Balance-Sheet Rolloff Nears End relates to Five Things You Need to Know to Start Your Day relates to Fed Minutes Show Officials Unsure on Need for Rate Hikes in 2019 relates to Stocks Edge Higher After Fed Minutes; Bonds Fall: Markets Wrap relates to The Policies That Will Decide Who Wins Indonesia’s Election relates to Indonesia Decision Day Guide: Rupiah Reprieve Offers Room to Breathe relates to Illinois Turns Warily to Bonds to Plug $134 Billion Pension Hole relates to Clarida Says Fed May Decide Soon on Timing of Asset-Runoff End
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Harker Says He's Comfortable If Inflation Overshoots Fed Target

Harker Says He's Comfortable If Inflation Overshoots Fed Target

  • Rates could get up to 3.25 percent this cycle, he says
  • Says he’s comfortable with moving to 2.5 percent inflation
Philadelphia Fed President Patrick Harker says he’s comfortable with price increases at 2.5 percent.

Federal Reserve Bank of Philadelphia President Patrick Harker defended the central bank’s symmetrical inflation target, saying that he’d be comfortable with price increases at 2.5 percent -- half a percentage point higher than the central bank’s official goal.

Harker, who does not vote on monetary policy this year, said the Fed should “take this slow and steady,” but “if we see inflation starting to accelerate past 2.5 percent, I think we have to act. Absent that, I think there are lots of good reasons to hold off.”

Harker said his base case for interest-rate increases is still three this year and three in 2019. He said he is “open” to a fourth 2018 move if inflation picks up. The policy-setting Federal Open Market Committee as a whole is projecting four hikes this year, according to the median estimate of its June economic projections.

Harker also said that he sees the Fed’s benchmark lending rate rising to 3 percent in the longer term, though the Fed could get to 3.25 percent this cycle in a mild overshoot.

“I ideally would not like to do that, but it’s possible,” he said.