Finance
Philadelphia Fed President Harker advocates for interest rate cut in September
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.
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.
Hiroki Takeuchi, co-founder and CEO of GoCardless.
Zed Jameson | Bloomberg | Getty Images
LISBON, Portugal — Financial technology unicorns aren’t in a rush to go public after buy now, pay later firm Klarna filed for a U.S. IPO — but they’re keeping a watchful eye on it for signs of when the market will open up again.
Last week, Klarna made a confidential filing to go public in the U.S., ending months of speculation over where the Swedish digital payments firm would list. Timing of the IPO is still unclear, and Klarna has yet to decide on pricing or the number of shares it’ll issue to the public.
Still, the development drew buzz from fintech circles with market watchers asking if the move marks the start of a resurgence in big fintech IPOs. For now, that doesn’t appear to be the case — however, founders say they’ll be watching the IPO market, eyeing pricing and eventually stock performance closely.
Hiroki Takeuchi, CEO of online payments startup GoCardless, said last week that it’s not yet time for his company to fire the starting gun on an IPO. He views listing as more of a milestone on a journey than an end goal.
“The markets have been challenging over the last few years,” Takeuchi, whose business GoCardless was last valued at over $2 billion, said in a CNBC-moderated panel at the Web Summit tech conference in Lisbon, Portugal.
“We need to be focused on building a better business,” Takeuchi added, noting that “the rest will follow” if the startup gets that right. GoCardless specializes in recurring payments, transactions that come out of a consumer’s bank account in a routine fashion — such as a monthly donation to charity.
Lucy Liu, co-founder of cross-border payments firm Airwallex, agreed with Takeuchi and said it’s also not the right time for Airwallex to go public. In a separate interview, Liu directed CNBC to what her fellow Airwallex co-founder and CEO Jack Zhang has said previously — that the firm expects to be “IPO-ready” by 2026.
“Every company is different,” Liu said onstage, sat alongside Takeuchi on the same panel. Airwallex is more focused on becoming the best it can be at solving friction in global cross-border payments, she said.
An IPO is a goal in the company’s trajectory — but it’s not the final milestone, according to Liu. “We’re constantly in conversations with our investors shareholders,” she said, adding that will change “when the time is right.”
‘Stars aligning’ for fintech IPOs
One thing’s for sure, though — analysts are much more optimistic about the outlook for fintech IPOs now than they were before.
“We outlined five handles to open the [IPO] window, and I think those stars are aligning in terms of the macro, interest rates, politics, the elections are out the way, volatility,” Navina Rajan, senior research analyst at private market data firm PitchBook, told CNBC.
“It’s definitely in a better place, but at the end of the day, we don’t know what’s going to happen, there’s a new president in the U.S.,” Rajan continued. “It will be interesting to see the timing of the IPO and also the valuation.”
Fintech companies have raised around 6.2 billion euros ($6.6 billion) in venture capital from the beginning of the year through Oct. 30, according to PitchBook data.
Jaidev Janardana, CEO and co-founder of British digital bank Zopa, told CNBC that an IPO is not an immediate priority for his firm.
“To be honest, it’s not the top of mind for me,” Janardana told CNBC. “I think we continue to be lucky to have supportive and long-term shareholders who support future growth as well.”
He implied private markets are currently still the most accommodative place to be able to build a technology business that’s focused on investing in growth.
However, Zopa’s CEO added that he’s seeing signs pointing toward a more favorable IPO market in the next couple of years, with the U.S. likely opening up in 2025.
That should mean that Europe becomes more open to IPOs happening the following year, according to Janardana. He didn’t disclose where Zopa is looking to go public.
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