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.
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(END) Dow Jones Newswires
November 12, 2019 15:12 ET (20:12 GMT)
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