Harker Says He's Comfortable If Inflation Overshoots Fed Target

(Bloomberg) -- Federal Reserve Bank of Philadelphia President Patrick Harker defended the central bank’s symmetrical inflation target, saying that he’d be comfortable with price increases at 2.5 percent -- half a percentage point higher than the central bank’s official goal.

Harker, who does not vote on monetary policy this year, said the Fed should “take this slow and steady,” but “if we see inflation starting to accelerate past 2.5 percent, I think we have to act. Absent that, I think there are lots of good reasons to hold off.”

Harker said his base case for interest-rate increases is still three this year and three in 2019. He said he is “open” to a fourth 2018 move if inflation picks up. The policy-setting Federal Open Market Committee as a whole is projecting four hikes this year, according to the median estimate of its June economic projections.

Harker also said that he sees the Fed’s benchmark lending rate rising to 3 percent in the longer term, though the Fed could get to 3.25 percent this cycle in a mild overshoot.

“I ideally would not like to do that, but it’s possible,” he said.

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