February 17, 2016•Update: February 17, 2016
NEW YORK
The Federal Reserve might wait until inflation reaches 2 percent before implementing a second rate hike, the head of the bank’s Philadelphia region said Tuesday.
"It might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike," said Patrick T. Harker while speaking at the University of Delaware.
The Fed increased its benchmark interest rate for the first time in almost 10 years last December, and signaled three or four hikes may come this year.
But Harker said falling energy prices and the appreciation of the dollar are some of the major factors that keep inflation low.
"I believe that once energy prices stabilize and start reversing, inflation will return to our 2 percent target ... it is unlikely that oil prices will continue to drop," he explained.
Economic policy decisions are dependent on U.S. macroeconomic data, and the opinion of Fed members could change with respect to that, according to Harker.
"Data will be a key factor in all of my future policy recommendations," he said, adding, "I see headline inflation accelerating at an annual average pace of 1.5 percent by the second half of this year."
Harker left the door open to more rate hikes this year, however, if the U.S. financial outlook appears positive in a shorter period of time, and inflation rises quicker than anticipated.
"If financial headwinds dissipate quickly and inflation picks up a bit more aggressively, it will require a slightly more aggressive approach to policy," he said.
