Philadelphia Federal Reserve President Patrick Harker said at the MBA Annual Conference in Philadelphia on Monday that he thinks interest rates can stay where they are if economic and financial conditions evolve as they have been.
“And so far, economic and financial conditions are evolving as I expected, perhaps even a tad better,” Harker said.
The Fed has raised interest rates 11 times since March of last year, pushing the federal funds rate to a 22-year high of 5.25% to 5.5% in a bid to lower soaring inflation. And while the central bank’s actions over the past 18 months to tame inflation and bring it to a 2% annual target have contributed to the current mortgage climate, disinflation is underway and the Fed’s interest rate policy is still making its way through the economy, Harker said.
“It will continue with inflation dropping below 3% in 2024 and leveling out at our 2% target,” Harker said. “Thereafter, however, there can be challenges in assessing the trend of disinflation. For example, September’s CPI report came out modestly on the upside, driven by energy and housing.
“Let me be clear about two things,” Harker continued. “First, I will not tolerate, and I believe my colleagues will not tolerate, a reacceleration of prices. But second, I do not want to overreact to the normal month-to-month variability of prices.”
If you are struggling amid high inflation, you could consider taking out a personal loan to help pay down debt at a lower interest rate, lowering your monthly expenses. Visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.
SOCIAL SECURITY CUTS: RETIREES COULD FACE MORE THAN $17,000 IN ANNUAL BENEFITS LOSSES
Outside factors help Fed achieve inflation goal
Beyond the Fed’s restrictive monetary policy, several outside factors have also helped push inflation down, Harker said. For example, this spring’s banking turmoil amid the collapse of Silicon Valley Bank (SVB) and Signature Bank triggered tighter credit conditions that lingered six months later.
Similarly, turmoil in labor markets is likely to exert downward pressure – not just in the loss of overall economic activity, but in the immediate impact on consumer spending, Harker said. Moreover, the Oct. 1 restart of student loan payments following a more than three-year pause may impact spending equally.
“Striking auto workers, for example, are forgoing their usual wages,” Harker said. “On top of all this, we can add the resumption of student loan payments. Now, again, we do not know what impact this will have on consumer spending and savings. But I do expect it will be impactful, if not significant.
“So against this backdrop, this backdrop of uncertainty, I believe that the prudent position is to be one where the policy rates can remain steady,” Harker continued.
If you’re concerned about high-interest debt, you could consider paying it off with a personal loan at a lower interest rate, which could cut your monthly payments. Visit Credible to get your personalized rate in minutes.
EXTREME WEATHER IMPACTING HOW BUYERS SHOP FOR HOMES: ZILLOW
Rates will stay high for longer
Harker is optimistic that the Fed won’t need to raise rates again, but he was less precise about how long rates will linger at their current level. As for future policy, he said he subscribed to the moniker “higher for longer.”
“My expectation is that rates will need to stay high for a while,” Harker said. “And while I really do not expect it, if inflation were to rebound, I know that I would not hesitate to support further rate increases, as our objective is to return inflation to the target rate.”
While rates may stay higher for longer, the good news is that the economy is holding steady.
“I continue to see strong underpinnings for the economy overall,” Harker said. “This economy is proving nothing if not to be resilient. I expect this to continue. GDP growth is outperforming estimates earlier this year. I expect GDP gains to continue through the end of 2023 before pulling back slightly in 2024. But, do not conflate a more moderate rate of GDP growth as contraction. Simply put, I do not anticipate a recession.”
Shopping for the best deal in a high mortgage rate environment can bring savings. If you’re trying to find the best mortgage rate, using the Credible marketplace to compare options from different lenders can help you compare your options at once without affecting your credit score.
BIDEN’S STUDENT DEBT FORGIVENESS MAY BE TAXED IN THESE FIVE STATES
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Read the full article here