Philadephia Federal Reserve President Patrick Harker said on Friday he expects three interest rate increases in 2017 if the labor market improves further and inflation moves to the Federal Reserve’s 2 percent goal.
Harker also said, however, that he believes the U. S. labor participation rate is « lower than I’d like » and that it is holding down productivity and growth.
« I see three modest hikes as appropriate for the coming year, assuming the economy stays on track, » Harker, who is a voting member of the Fed’s policy-setting group this year, said in a prepared speech at an event sponsored by the New Jersey Bankers Association.
« The economy is displaying considerable strength, » he said.
U. S. gross domestic product was revised up to 3.5 percent in the third quarter, the fastest pace in two years.
« Consumer confidence is strong, retail sales are still solid — though slightly slower than previously anticipated — and equity markets are up, » Harker said.
The core index on personal consumption expenditure, the Fed’s preferred inflation gauge, has risen to 1.7 percent with inflation expectations hitting 2 percent, he noted.
« As expectations consolidate around our target rate, it makes it more likely that our target will become reality, » Harker said.
