Fed's Harker favours shift towards 25bp rate hikes

A top US central bank official joined the camp of those calling for a further downshift in the pace of interest rate hikes to 25 basis points per meeting.

In remarks prepared for a speech, the head of the Federal Reserve Bank of Philadelphia, Patrick Harker, also said he was anticipating "a few more" hikes.

"I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed," he said.

However, like other Fed officials, Harker also expected rates to be maintained at a higher level than at present for longer.

"I've been in the camp that we need to get rates above 5%. How far above? We'll let the data dictate that," Harker said in response to a question, Bloomberg reported.

"But I don't think we need to get much further than 5% at this point. And then sit for a while so that we’re not causing undo harm to the labor market."

He also reportedly argued against overdoing the monetary policy response, saying that Americans should understand that it would take a couple of years to rein in price growth.

Harker's forecasts were for core CPI to ease to 3.5% in 2023 and then to 2.5% in 2024 and 2.0% in 2025, while gross domestic product would expand at 1% during 2023 and by 2% over the next two years.

"I think we have to just accept that. But as long as it’s moving in the right direction, we're making progress.

"As long as we’re getting, moving in the right direction, I think we should be more cautious than more aggressive."

Harker was a vote-wielding member of the Federal Open Market Committee in 2023.