Philadelphia Fed’s Harker Says March Is on the Table for a Hike

  • Harker, a policy voter, says it depends on how data shape up
  • Regional Fed chief says January jobs number was ‘very good’

Could Fed Hike Rates More Than Markets Expect?

Federal Reserve Bank of Philadelphia President Patrick Harker said the U.S. central bank’s March meeting is a live option for an interest rate increase if job market momentum holds up, growth continues and wages rise.

“March is on the table. I would never take a meeting off the table, it depends on how the data evolve,” Harker, who votes on policy this year, told reporters Monday after a speech in San Diego. Asked what would convince him to lift rates next month, he said “we saw some very good jobs numbers last week, continued good news around GDP and GDP growth, and continued signs that the labor market is strengthening.”

Harker is the second Fed official to say publicly that the March 14-15 meeting of the policy-setting Federal Open Market Committee should be considered for a potential rate move. John Williams, his colleague from San Francisco and a non-voter this year, told Bloomberg last week that he sees the next meeting as a possible rate-hike candidate. Investors give roughly a one in four chance of a quarter-point increase in March, according to federal fund futures.

The Fed left rates unchanged at its policy meeting last week while noting that measures of business and consumer sentiment had improved. U.S. stocks have risen since Donald Trump’s Nov. 8 election win as investors bet he’d deliver growth-boosting tax cuts, spending increases and ease up on regulations, though the new administration has yet to lay out concrete plans.

Fiscal Policy

Policy makers must gauge how quickly to raise rates to keep the labor market from running too hot and stoking inflation. While their task has been complicated by uncertainty over the future of U.S. fiscal policy, recent data have shown progress toward their twin goals of inflation around 2 percent and maximum employment.

“I don’t want to get behind the curve -- I don’t think we’re behind the curve now,” Harker said.

Harker also said it was still too early to judge what the Trump team’s policies would mean for the U.S. economic outlook.

“They really haven’t laid out, the administration, any details about what those policies would look like -- and it’s the package of policies,” Harker said. “You could say, on one side, we’re going to create infrastructure stimulus, at the same time we’re going to reduce trade, by putting up tariffs, and then, potentially, retaliatory tariffs coming. What’s the net effect of that? It all depends on the relative sizes of those programs.”

Dodd-Frank Act

Harker also cautioned against rolling back the Dodd-Frank Act without careful consideration of the banking reforms enacted in response to the 2008-2009 financial crisis.

“Let’s just be thoughtful about what kind of changes we want, and make sure we really understand the implications of those changes,” he said, noting that there are stability-enhancing measures in Dodd-Frank, and it’s impossible to talk about the law in generalities.

Trump on Friday ordered a sweeping review of Dodd-Frank in his administration’s most aggressive steps yet to loosen regulations in the financial services industry.

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