Fed’s Harker says it will soon be time to start cutting asset purchases
October 14 (Reuters) – It will soon be time to start cutting Federal Reserve asset purchases from the current rate of $ 120 billion per month, but the central bank is unlikely to raise interest rates before at least a year, Philadelphia Federal Reserve Bank said Thursday President Patrick Harker.
“I’m in the camp that thinks it will soon be time to start slowly and methodically – frankly, boring – cutting our $ 120 billion monthly treasury bill and mortgage-backed securities purchases,” said Harker in remarks prepared for a virtual discussion, repeating a point of view he shared last month.
Harker said these asset purchases do little to address supply issues that are hampering the labor market recovery.
The Fed official lowered his expectations for the growth of the US economy this year due to the Delta variant, which damaged consumer confidence and dealt a blow to the entertainment and hospitality industry .
Harker now expects the economy to grow around 5.5% this year and around 3.5% in 2022. He said he expects inflation to be about around 4% for 2021 before dropping to “just over” 2% next year and “just” 2% in 2023.
Several Fed officials reported that the central bank is still on track https://www.reuters.com/world/us/feds-clarida-employment-test-begin-bond-taper-all-met-2021 -10-12 to start reducing the pace of its asset purchases as early as next month, despite weaker-than-expected employment growth in September.
A reading from the September Fed policy meeting showed a growing number of policymakers feared that high inflation might persist https://www.reuters.com/business/patient-or-aggressive-fed-policymakers- split-inflation-response-2021 -10-13 longer than expected.
Harker said policymakers can assess interest rates once the gradual reduction is over, but said he believes rates will remain stable for the near future if inflation is not out of control. “I wouldn’t expect any interest rate hikes until late next year or early 2023 unless the inflation picture changes dramatically,” he said. (Report by Jonnelle Marte; edited by Diane Craft)