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- Fed's Harker: Fed “collectively underestimated” impact of fiscal spending on inflation
Fed's Harker: Fed “collectively underestimated” impact of fiscal spending on inflation
Philadelphia Fed President and FOMC member Patrick Harker said on Tuesday that Fed policymakers "collectively underestimated" the impact that fiscal spending in 2020 would have on inflation, reported Reuters. Harker said that there is "definitely correlation" between the yield curve and later recessions, but there is a need to look at a host of market signals, including inflation expectations and market sentiment.
Referring to his dots in the Fed's latest dot-plot, Harker said that he was a "median dot" and predicts seven rates hikes this year, though that is not a commitment to seven. Developments in China are "another wrench" in global supply chain and could make a 50 bps hike more appropriate, Harker noted, adding that balance sheet reduction could add the equivalent of two quarter point rate increases to Fed tightening.
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