Fed’s Harker: GDP continues just as we expected

Speaking at FintechHe adds:

  • GDP running slightly above trend
  • Labor markets feeling really tight
  • Best estimate shows GDP down 100bp this quarter
  • GDP will bounce back from the hurricanes in 4Q
  • We are starting to see some wage pressures
  • Low growth in wages may be due to shift in who is employed, 
  • We are running below our 2% inflation target
  • Inflation is the one area that gives me pause
  • For the average American low inflation is not a problem but there are risks for monetary policy. 
  • Our work showing we’re overstating inflation is persuasive
  • Pausing on the Fed Funds rate path is appropriate
  • Today’s PCE print was weak
  • Penciled in increase in Dec and 3 tightenings in 2018
  • B/S unwind is to take several years
  • Fed may end up with B/S of $2.5T. Will know right size when we see it.
  • My rate estimates assume inflation will come back

Fed’s Harker is the President of the Philadelphia Fed. He is a voting member in 2017 (not in 2018).  His pencil likely has an eraser but at this point, a Dec hike is expected.
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