The Fed’s Harker wants to take a patient approach on hiking rates but is prepared to start the balance sheet runoff now. “Let’s start the process of ceasing reinvestment,” he told the WSJ. “Let’s see how the market reacts to that, and then consider the third rate increase this year-whether that occurs or not.”
The trepidation is in contrast to his comments just two weeks ago when he said inflation weakness was temporary and that he still wanted to hike. Another twist is that just before that comment — in an interview with the FT — he said he wasn’t sure he wanted to start the runoff.
So we really have no idea where Harker stands and maybe he doesn’t either. On inflation, he now says it “could be transitory” when before he was confident. In the bigger picture he said he’s in “wait-and-see mode”.
Source: Adam Button, Chief Currency Analyst, Managing Editor at Forexlive
