“I believe we are at a point where we can keep the exchange rate at its current level by doing nothing… And in fact, we are doing quite a lot,” said Mr. Harker.
Economic and financial conditions are improving more than expected, Harker said, with prices cooling and the labor market tightening.
“I am sure that policy rates are at a limited level, and as long as they remain there, we will gradually contain inflation and bring the market to a better balance,” the head of the Philadelphia Fed affirmed.
The Federal Reserve has been cautious this year after raising interest rates sharply in 2022. Fed policymakers have said they will need to keep rates high for a long time to cool inflation.
Still, there is a chance of another rate hike this year as bond yields rise. Meanwhile, a surprise rise in the US consumer price index in September could put fresh pressure on Fed officials, who are determined to bring inflation down to their 2% target. Harker noted the CPI increase, but he is concerned about the volatility of the data over several months.
“First of all, we will not accept the price increase again. Second, I do not want to overreact to the monthly price fluctuations. That is normal,” the official said.
The Philadelphia Fed president stressed that he is prepared to adjust policy “some way” if the economic picture changes. He also noted that some risks that could impact include higher oil prices, a possible government shutdown and continued student loan payments.
In August, at the Fed's annual policy symposium in Jackson Hole, Wyoming, Mr. Harker signaled his support for keeping interest rates at current levels.
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