Fed's Harker adds to drumbeat of approaching US rate hikes

A man walks past the Federal Reserve in Washington.
A man walks past the Federal Reserve in Washington.PHOTO: REUTERS

PHILADELPHIA (REUTERS) - The Federal Reserve will likely raise interest rates two or three times this year, another top Fed official said on Monday (May 23), reinforcing the central bank's message it is getting ready to act now that the US economy has recovered from a weak winter.

In a repetition of remarks made in recent months, Philadelphia Fed president Patrick Harker said he expects US rates to move "meaningfully" away from near zero in the second half of 2016.

The Fed raised rates to 0.25-0.5 per cent in December and has since stood pat. But after a flurry of confident-sounding speeches by Fed officials over the last week, and a continuation of stronger economic data, both the central bank and financial markets now expect a second hike in June or July.

"There will likely be two or perhaps even three rate hikes over the course of the year," Mr Harker, a relatively new addition to the Fed who does not have a vote on policy this year, told the Bond Club of Philadelphia.

He did not specifically mention action at the mid-June or late-July Fed policy meetings.

Mr Harker repeated his expectation that inflation will rise to a 2-per cent target by some time next year, and he predicted US economic growth for the rest of the year should be "meaningfully more upbeat" than the 0.5 per cent logged in the first quarter.