(Bloomberg) -- Federal Reserve Bank of Philadelphia President Patrick Harker said officials are on track to lower interest rates this year, but the exact timing will depend on what happens with the economy.
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Harker said it’s taking longer than expected to bring inflation to the Fed’s 2% target and that progress has been uneven. However, he said the economy overall is strong and the labor market has cooled toward pre-pandemic trends.
“I still see us on a downward policy rate path. Looking at everything before me now, I am not about to walk off this path or turn around,” Harker said Thursday in remarks prepared for an event in Princeton, New Jersey. “But the exact speed I continue to go along this path will be fully dependent upon the incoming data.”
Fed officials lowered interest rates by a quarter point last month, bringing their benchmark rate down a full percentage point since September. Fed Chair Jerome Powell and other officials have said the US central bank has the leeway to proceed more cautiously with rate cuts following data suggesting a strong labor market and lingering inflation.
Harker echoed that sentiment, emphasizing the Fed should remain data dependent and not act “with haste.”
“I think it’s appropriate for us to take a bit of a pause right now and see how things shake out,” Harker said during a question-and-answer session following his prepared remarks. “We can stay where we are for a little bit — probably not long,” he said, adding policymakers need to “let the data play out.”
The Philadelphia Fed chief said inflation is on a path back to 2%, despite several upside risks to price stability and the economy. Globally, that includes the war in Ukraine, conflict in the Middle East and the instability of some governments in Europe.
“Here at home, we await potential policy changes which may have an economic impact,” Harker said. He added the bird flu could also impact food costs.
Minutes from the Fed’s December gathering showed that policymakers believe they are “at or near the point at which it would be appropriate to slow the pace” of rate cuts. Median projections released after that meeting showed policymakers penciled in two rate reductions for this year, down from the four cuts projected in September.
Harker is set to retire from his Fed position at the end of June.