Fed's Harker says four rate hikes are appropriate for this year
NEW YORK, Feb 1 (Reuters) - It may be appropriate for the Federal Reserve to raise interest rates four times this year, and to move more aggressively if the factors leading to higher inflation, such as supply chain issues, are not mitigated, Philadelphia Fed President Patrick Harker said on Tuesday.
"Right now, I think four 25-basis-point increases this year is appropriate," Harker said during an interview with Bloomberg TV. "But there's a lot of risk here," including the risk that inflation is worse than expected, or that it eases faster than Fed officials expect, he said.
Policymakers say they plan to raise interest rates in March, and to start reducing the Fed's balance sheet later this year, as they work to remove the accommodation provided to stabilize markets and the economy during the pandemic.
Asked whether he would support raising interest rates by half a percentage point in March, Harker said he would need to be convinced it was needed.
"If inflation stays where it is right now and continues to start to come down, I don't see a 50-basis-point increase," said Harker, who votes for policy this year as an alternate for the Boston Fed. "But if we see a spike, then I think we might have to act more aggressively."
He said he would like the Fed to start shrinking its bond holdings once interest rates are close to 1% or 1.25%, from today's near-zero levels.
"That reduction is going to be steeper and faster than the last time we tried it," Harker said.
Fed officials said last week that they would like to shrink those holdings primarily by letting bonds run off the balance sheet as they mature. Harker said he would not commit to actively selling assets until he saw more analysis. "This is something we're actively looking at right now," he said.
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