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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