Fed’s Patrick Harker ‘extremely concerned’ about inflation, sees ‘deliberate’ rate hikes

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Patrick Harker, president of the Federal Reserve Bank of Philadelphia, at the Fed’s annual symposium in Jackson Hole, Wyoming.

Gerard Miller | CNBC

Philadelphia Federal Reserve Chairman Patrick Harker joined the chorus of central bankers warning of inflation and interest rate hikes needed to control rising prices.

In remarks on Wednesday, the policymaker said he was worried about an inflation rate at its highest level in 40 years. He expects the Fed to respond by raising rates and reducing the level of bonds it holds on its balance sheet.

“Inflation is way too high, and that worries me deeply,” Harker told the Delaware State Chamber of Commerce.

“The bottom line is that generous fiscal policies, supply chain disruptions and accommodative monetary policy have pushed inflation much higher than I – and my colleagues in the [Federal Open Market Committee] — are comfortable,” he said. “I’m also concerned about inflation expectations coming off.”

The cautious tone comes the day after two of his colleagues, Governor Lael Brainard and San Francisco Fed President Mary Daly, also expressed concern over inflation. Brainard, an influential political “dove” who generally favors lower rates and less restrictive monetary policy, said reducing inflation is “of paramount importance” and would require “a series of rate hikes of interest” and a “rapid” balance sheet reduction.

Stocks fell and bond yields rose on the comments.

Harker’s comments closely resembled Brainard’s views on rate hikes.

He said he expects “a series of deliberate and methodical increases as the year continues and the data evolves”, although he was not so adamant on the issue of the runoff from the balance sheet.

Harker is a non-voting FOMC member who nonetheless has a say in the committee’s final decisions. On the broader economy, he sees growth as “robust” and anticipates inflation will eventually fall to the Fed’s 2% target.

At its March meeting, the FOMC approved its first rate hike in more than three years. Markets are expecting a series of hikes that could ultimately push short-term borrowing rates to 3% or more.

Wall Street will monitor Wednesday for the release of the minutes of that meeting at 2 p.m. ET. After the meeting, Chairman Jerome Powell said the summary would reflect discussions on bond holdings, which brought the balance sheet to about $9 trillion.

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