Off The Wire
Fed's Harker says economy looks 'pretty good,' inflation on track for 2% target
SOMERSET, N.J. (Reuters) - Philadelphia Federal Reserve Bank President Patrick Harker said Friday that a robust labor market is boosting consumer confidence and lifting the U.S. economy, despite headwinds such as a global slowdown and trade uncertainty, which are dragging down business investment.
The policymaker expects the economy to grow by about 2% this year and projects that inflation is on track to hit the central bank's 2% target, he said in remarks prepared for delivery at a banking forum in Somerset, New Jersey.
"Overall, the economy is looking pretty good," Harker said. "We are in the longest economic expansion on record, and I see growth returning to trend of about 2 percent this year, a view that is widely shared."
Fed officials voted to leave interest rates unchanged at the December policy meeting and have signaled that rates are likely to stay put for the foreseeable future, barring a substantial change to the economic outlook. Harker, who opposed the September and October rate cuts, becomes a voting member for the Fed's monetary policy decisions this year.
Harker also said the Fed is still learning from the measures it is taking to calm money markets after a shortage of cash in mid-September caused a spike in short-term borrowing rates, repeating remarks he made earlier this week in New York.
The Fed official said the central bank's efforts to increase liquidity worked to calm money markets after the cash shortage in September pushed up short-term rates.
"While this was certainly not an average day, it's important to note that the repo market did not freeze," Harker said Friday.
The Fed has been injecting billions of dollars of cash into the market for repurchase agreements, or repo, since the disruption. It is also purchasing $60 billion a month in Treasury bills to increase the level of reserves, purchases it expects to continue into the second quarter of this year.
Harker said officials have several questions to answer before moving forward with a potential standing repo facility, which would allow financial firms to trade Treasuries and other securities for cash.