Finance

Philadelphia Fed President Harker advocates for interest rate cut in September

Published

5 months ago

August 22, 2024

Philadelphia Fed President Patrick Harker: Job market revisions weren't a surprise

Philadelphia Federal Reserve President Patrick Harker on Thursday provided a strong endorsement to an interest rate cut on the way September.

Speaking to CNBC from the Fed’s annual retreat in Jackson Hole, Wyoming, Harker gave the most direct statement yet from a central bank official that monetary policy easing is almost a certainty when officials meeting again in less than a month.

The position comes a day after minutes from the last Fed policy meeting gave a solid indication of a cut ahead, as officials gain more confidence in where inflation is headed and look to head off any potential weakness in the labor market.

“I think it means this September we need to start a process of moving rates down,” Harker told CNBC’s Steve Liesman during a “Squawk on the Street” interview. Harker said the Fed should ease “methodically and signal well in advance.”

With markets pricing in a 100% certainty of a quarter percentage point, or 25 basis point, cut, and about a 1-in-4 chance of a 50 basis point reduction, Harker said it’s still a toss-up in his mind.

“Right now, I’m not in the camp of 25 or 50. I need to see a couple more weeks of data,” he said.

The Fed has held its benchmark overnight borrowing rate in a range between 5.25%-5.5% since July 2023 as it tackles a lingering inflation problem. Markets briefly rebelled after the July Fed meeting when officials signaled they still had not seen enough evidence to start bringing down rates.

However, since then policymakers have acknowledged that it soon will be appropriate to ease. Harker said policy will be made independently of political concerns as the presidential election looms in the background.

“I am very proud of being at the Fed, where we are proud technocrats,” he said. “That’s our job. Our job is to look at the data and respond appropriately. When I look at the data as a proud technocrat, it’s time to start bringing rates down.”

Harker does not get a vote this year on the rate-setting Federal Open Market Committee but still has input at meetings. Another nonvoter, Kansas City Fed President Jeffrey Schmid, also spoke to CNBC on Thursday, offering a less direct take on the future of policy. Still, he leaned toward a cut ahead.

Watch CNBC's full interview with Kansas City Fed President Jeffrey Schmid

Schmid noted the rising unemployment rate as a factor in where things are going. A severe supply-demand mismatch in the labor market had helped fuel the run in inflation, pushing wages up and driving inflation expectations. In recent months, though, jobs indicators have cooled and the unemployment rate has climbed slowly but steadily.

“Having the labor market cool some is helping, but there’s work to do,” Schmid said. “I really do believe you’ve got to start looking at it a little bit harder relative to where this 3.5% [unemployment] number was and where it is today in the low 4s.”

However, Schmid said he believes banks have held up well under the high-rate environment and said he does not believe monetary policy is “over-restrictive.”

Harker next votes in 2026, while Schmid will get a vote next year.

Don’t miss these insights from CNBC PRO

Finance

Stocks making the biggest moves midday: FUBO, PYCR, PLUG

Published

5 hours ago

January 6, 2025

Business Finance News

Finance

Michael Barr to step down as the Fed’s head of banking supervision to avoid clash with Trump

Published

7 hours ago

January 6, 2025

Business Finance News

The Federal Reserve’s top banking regulator will be stepping down next month, paving the way for President-elect Donald Trump to name a replacement and heading off a potential confrontation between the two.

Michael Barr’s resignation from the position, which is formally called the vice chair for supervision, takes effect as of Feb. 28, though he will stay on as a governor on the Fed board. His term as Fed governor lasts until 2026.

There had been speculation that Trump might seek to replace Barr after he takes office Jan. 20, the announcement will ease that transition amid speculation that the new president wants someone who is more bank-friendly to take the role.

Though he did not specifically mention the rumors that Trump would attempt to remove him, Barr said in a statement that “the risk of a dispute over the position could be a distraction from our mission. In the current environment, I’ve determined that I would be more effective in serving the American people from my role as governor.”

“It has been an honor and a privilege to serve as the Federal Reserve Board’s vice chair for supervision, and to work with colleagues to help maintain the stability and strength of the U.S. financial system so that it can meet the needs of American families and businesses,” he said.

Bank stocks rallied following the announcement. The SPDR S&P Bank exchange-traded fund that tracks the industry’s leaders gained more than 1%.

CNBC.com has reached out to the Trump transition team for comment.

In a release announcing the decision, the Fed noted that it will not make any major decisions on rules and regulations until a successor is named. The bank has been revising a set of new rules, dubbed the Basel endgame, that has been broadly unpopular in the industry.

Because the Fed is limited to seven board members, Trump will have to name someone from current group to the new position.

The position was created following the 2008 financial crisis that saw the implosion of multiple big names on Wall Street. Under Barr’s watch, the industry saw a crisis in early 2023 in which Silicon Valley Bank and a few other names collapsed, forcing the Fed to implement a liquidity facility to keep the issues from spreading.

In recent days, speculation had swelled that Trump might seek to force Barr from office. A Reuters report in late December indicated that Barr was consulting with a law firm over his legal options should the president-elect make a move.