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The Federal Reserve should continue raising it benchmark interest rate until it is over 3.4% and then “sit for a while,” said Philadelphia Fed President Patrick Harker on Thursday.
“We don’t need to rush way up and then rush way down,” Harker said, in CNBC interview from the Fed’s retreat in Jackson Hole.
“We need to go up and sit for a while and let things play out,” he added. When rates are above 3.4%, they will begin to slow down the economy, he said.
The idea that the Fed would hold rates at a high level has been a theme of Fed speakers in the run-up to the Jackson Hole conference, which gets underway Friday.
At the moment, the Fed’s benchmark rate is in a range of 2.25%-2.5%.
Some commentators have said this is a veiled pushback on financial markets, which have priced-in Fed rate cuts starting as soon as next year.
Fed officials are debating whether to hike rates in September by 0.75 percentage points for the third straight meeting or to slow down to a half percentage point hike.
Harker said he would wait for the August inflation data and then decide.
But Harker went on the say that he wanted the public to know that a half percentage point move was still substantial.
Since 1983, the Fed has raised rates 86 times and 75 of those moves were under a half a percentage point, he noted.
Harker won’t be a voter on the Fed’s interest rate committee until next year.
U.S. stocks
DJIA,
+0.03%
SPX,
+0.48%
were higher on Thursday and the yield on the 10-year Treasury note
TMUBMUSD10Y,
3.081%
rose to 3.1% as the market awaits Fed Chairman Jerome Powell’s speech at Jackson Hole on Friday morning.
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