Fed should get on with rate hikes: Official

NEW YORK • The Federal Reserve should consider another interest rate hike as early as next month if the US economy continues to improve as it has of late, a top Fed official said, adding he would prefer at least three hikes before year-end.

Mr Patrick Harker, who became head of the Philadelphia Fed in the middle of last year, said on Tuesday that while he supported last week's decision by his colleagues to leave policy unchanged, "there is a strong case that we need to continue to raise rates".

"I think we need to get on with it," said Mr Harker, who does not vote on policy until next year.

"This economy is really quite resilient to a lot of the headwinds (including the strong dollar), so if that continues I would be supportive of another 25 basis point rise."

The US central bank, which lifted rates by 25 basis points from near zero in December, in its first hike in almost a decade, last week left rates unchanged and downgraded its expectations for the economy due to risks from abroad and residual worries about early- year market turmoil.

At that meeting, published forecasts show that nine of the Fed's 17 policymakers recommended two rate hikes through the rest of this year, three officials recommended three hikes, and four recommended four hikes. One official recommended just one hike in 2016.

"I am not a two (rate) rise person," Mr Harker told the Money Marketeers bond traders in New York. "I'd rather see (more hikes this year)," he added.

That puts Mr Harker among the Fed hawks, even though last month he urged patience and said more hikes could come in the second half of the year.

Mr Harker said monetary policy would still be "incredibly accommodative" even after three more rises, which would put the federal funds rate just above 1 per cent. It is around 0.37 per cent now.

Economists and traders give long odds to the chances of a tightening at the Fed's next policy meeting, on April 26-27.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 24, 2016, with the headline 'Fed should get on with rate hikes: Official'. Print Edition | Subscribe