The U.S. central bank should keep its benchmark interest rate unchanged for the time being, as growth is in a good place and inflation should hit the central bank’s 2% annual target, two Federal Reserve officials said Monday.
“My own view right now is that we should hold steady for a while and watch how developments and the data unfold before taking any more action,” said Philadelphia Fed President Patrick Harker, a voting member of the Fed’s interest-rate committee this year.
“Overall, I think the economy is in good shape,” Harker said in remarks at an event at the University of Delaware.
He did not seem as worried as some of his colleagues about low inflation. The Fed hasn’t hit its 2% inflation target in any sustainable way since before the last recession more than a decade ago.
The Fed’s favorite inflation measure, the personal consumption expenditure price index, rose to 1.6% in December after six months in a range of 1.3%-1.4%.
“We haven’t quite met our 2% inflation target, but we’re on track to get there,” Harker said, while acknowledging the process might be slow.
Fed Chairman Jerome Powell expressed a bit more concern about low inflation at his press conference 12 days ago. He noted low inflation gives a central bank less room to reduce interest rates and support the economy in the next downturn.
“We have seen this dynamic play out in other economies around the world, and we are determined to avoid it here,” Powell said.
In a separate discussion, San Francisco Fed President Mary Daly said that she thinks inflation is moving higher, but forecast the central bank wouldn’t hit its 2% inflation target until 2021.
“My own forecast for inflation is that it is gradually moving up to target, but my expectation is it wouldn’t achieve something like 2% until somewhere in 2021 as opposed to 2020,” Daly told reporters after a speech in Dublin, Ireland.
Daly, who is not a voter this year, agreed with Harker that the Fed’s monetary policy should remain on hold.
“Policy is in a good place. The economy is in a good place. And barring a material change in the outlook, then I’m comfortable with policy where it’s at, for the foreseeable future,” Daly said.
Stocks closed at session highs on Monday with the S&P 500 index SPX, +0.73% up 22 points to close at 3,350.