Philadelphia Federal Reserve Chairman Patrick Harker said Thursday he sees three or four rate hikes this year as appropriate as the central bank tackles a nagging inflation problem.
His thinking, outlined in a live interview on CNBC's Closing Bell program, aligns with estimates released in December by the Federal Open Market Committee's policymaking body.
But while officials then flagged the likelihood of a three-quarters-point point hike in the Fed's interest rate this year, Harker said he may be open to more.
“We must take action against inflation. She's more persistent than we thought some time ago. I haven't been on the 'transition' team for a while now," he said, citing the term Fed officials used to characterize inflation for most of 2021 before it pivoted towards the end of the year. "I think it's appropriate to take action this year," Harker said. "I entered three [hikes], but four are out of the question for me."
He was speaking the same week that Labor Department reports showed that inflation was rising from the US economy. Consumer price inflation is at 7%, the highest annual rate since June 1982, while wholesale prices rose 9.7% year-on-year in 2021, the largest full-year data movement dating back to 2010.
After the December meeting, the FOMC set out a schedule that would also complete the monthly asset purchases by around March. Subsequent minutes released showed that some members also thought the Fed should start reducing the size of its balance sheet this year, likely by withdrawing some of its bond proceeds each month.
But Harker advocated a slower approach. He thinks the Fed should wait until it raises rates "for the sake of argument" or four hikes before beginning to trim the more than $8.8 trillion balance sheet left by the Fed asset purchases during the pandemic.
"I don't want to do it all at once. I think that's just the wrong way," he said. "Let's do them in stages."
Going slow, he said, would cushion the economy from shocks that could occur if the Fed backed away from the easiest monetary policy in its history. He said the Fed could avoid wrecking the recovery if it was "careful and methodical." So I'm not in the camp of raising interest rates and normalizing balance sheets at the same time.”
Earlier in the day, Chicago Fed President Charles Evans said he believes three rate hikes are most likely, although he is open to more.
"That's probably a good opening bid this year depending on how the data rolls out," Evans told reporters. "It could be four if data on inflation doesn't improve fast enough."
Neither Evans nor Harker are voters in the FOMC this year, although they can voice their opinions at policy meetings and their views are part of the Committee's "dot chart" of members' interest rate expectations.