Fed's Harker Says October Rate Cut Wasn't Needed
November 12 2019 - 3:27PM
Dow Jones News
By Michael S. Derby
NEW YORK -- Federal Reserve Bank of Philadelphia President
Patrick Harker said Tuesday that the U.S. central bank was wrong to
lower interest rates last month.
Mr. Harker, who isn't a voting member of the rate-setting
Federal Open Market Committee this year, said he would have
dissented from the Fed's third rate cut of 2019. Mr. Harker was
speaking at an event held by the Society for Advancing Business
Editing and Writing Fall Conference in New York.
The Fed lowered rates in October, pushing its overnight
interest-rate target to between 1.50% and 1.75%, as it sought to
reduce the risks posed to an otherwise healthy economy by trade
uncertainty and slowing global growth.
After the last rate cut, key Fed leaders who supported lowering
short-term borrowing costs signaled no more action is likely for
now.
Rate cuts have been internally controversial within the Fed.
Leaders of the Boston and Kansas City Fed banks have dissented
against all three rate cuts this year. Other regional Fed
presidents have also expressed uneasiness about the move. Last
week, Atlanta Fed chief Raphael Bostic said he would have voted
against lowering rates if he could have.
Although Mr. Harker said October's rate cut was the wrong move,
he didn't call for any change in policy now. "I'm of the mind we
stay put now and see how things work out," he said.
Mr. Harker said he disagrees with the majority view on the Fed,
but he isn't worried about the divergence. He said when it comes to
the U.S. economic outlook, divergent views come down to different
interpretations of the data and risk tolerances among policy
makers.
Mr. Harker said the main issue holding growth back right now is
uncertainty. He added that the cost of capital isn't a source of
restraint, which means lowering rates right now simply won't have
much impact on economic activity. And that is why the Fed should
refrain from taking basically futile actions, he said.
Mr. Harker said he expects growth to moderate to just over 2%
next year, with slowing job creation and a move up to a 4% jobless
rate over some uncertain time frame. Mr. Harker also said he sees
inflation "creeping" back up to 2% and added he isn't worried about
small misses on that goal.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
November 12, 2019 15:12 ET (20:12 GMT)
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