(Bloomberg) -- Federal Reserve Bank of Philadelphia President Patrick Harker said officials should allow their policy stance to continue to lower inflation, signaling support for holding interest rates steady for now.
“The policy rate remains restrictive enough to continue putting downward pressure on inflation over the longer term, as we need it to, while not negatively impacting the rest of the economy,” Harker said in remarks prepared for an event Thursday at the University of Delaware.
After the central bank lowered its benchmark interest rate three consecutive times at the end of 2024, officials have broadly shifted to a cautious outlook for the timing of further cuts. They have pointed to inflation that lingers above the central bank’s 2% target.
Data due Friday is expected to show the Fed’s preferred measure of underlying inflation picked up in January from a month earlier, a Bloomberg survey of economists shows.
Investors see essentially no chance of an interest-rate cut at the Fed’s meeting next month, according to the futures market.
Harker cited several reasons he believes officials should “let monetary policy continue to work.” He said the labor market has settled into a solid pace, while economic growth remains positive.
“From the macro view, the data I currently see allows me to provide an economic outlook that is optimistic, despite the ongoing challenge of getting inflation back to target,” he said.
Still, he flagged signs many consumers are feeling financial strain, as reflected in credit-card borrowing data.
“This is not necessarily a flashing red light to me, but a yellow one,” he said.
Meanwhile, Fed policymakers are also in wait-and-see mode regarding President Donald Trump’s economic agenda. Trump is seeking to implement sweeping changes to trade and immigration policy, and analysts’ estimates of how the plans could impact inflation, the labor market and economic growth vary.
Harker said factors such as changing policies in Washington and around the world are adding uncertainty to inflation dynamics. He also noted that the US bird flu outbreak is leading to higher egg prices for shoppers.
“This is why we watch the data and then react, if we must,” he said.
--With assistance from María Paula Mijares Torres.
