The market is openly mocking Patrick Harker, president and chief executive officer of the Federal Reserve Bank of Philadelphia.
Harker dismisses Brexit as a worry (In general so do I, but politicians can go crazy, so the outcome is uncertain as they say).
That said, I agree with the market view on hikes vs. that of Harker.
The Wall Street Journal reports Fed’s Harker Dismisses Brexit, Suggests Two More Rate Hikes This Year.
Federal Reserve Bank of Philadelphia President Patrick Harker shrugged off the threat to the U.S. economy posed by the Brexit vote and indicated the U.S. central bank may have two more rate rises ahead of it this year.
“Brexit is low on my list of risks, and I do not anticipate more than a transitory couple of 10ths of a percentage point slowdown in growth” to by caused by that event, Harker said in the text of a speech to be delivered in Philadelphia.
The official said he projects the U.S. economy will continue to grow, adding that in this environment, the Fed remains on track to boost further the cost of borrowing, although he didn’t say when he expects those increases to happen. “I anticipate that it may be appropriate for up to two additional rate hikes this year,” with the funds rate target rate approaching 3% by the end of 2018, he said.
Market Laughs at Harker
Going all the way out to the June 2017 meeting, the market expects no hikes.
As I have stated on numerous occasions, the Yellen Fed is desperate to hike. The Fed wants to hike now so the have “ammunition” to cut when the next recession hits.
That is the way their minds works. They are all trained in the same way.
Thus, one has to wonder if this is a trial balloon of some sort hoping to get the market expectation of hikes back up.
However, it’s highly likely that Harker is speaking his mind and is simply clueless about the state of the economy.
Mike “Mish” Shedlock