US Fed's Harker: Interest Rate Cut Still Possible Later This Year, Deeply Concerned About Government's Fiscal Situation

Philadelphia Fed President Patrick Harker recently stated that, given the highly uncertain economic outlook, an interest rate cut is still possible this year. He also expressed concerns about the quality of economic data that US Fed officials use to make decisions.

When asked about easing monetary policy, Harker claimed that it was possible and that he would never rule out such a possibility. "If the data shows that inflation is not rising rapidly, but unemployment is increasing, then one or more interest rate cuts this year are possible, though it is still difficult to determine at this point," he said.

It is reported that Harker will retire at the end of June, and Anna Paulson, currently the director of research at the Chicago Fed, will succeed him. The US Fed's next meeting will be held from June 17 to 18, and it is widely expected that the central bank will keep its interest rate target unchanged within the range of 4.25% to 4.5%.

Currently, it is uncertain what will happen next, as the chaotic trade policies of the Trump administration, particularly the ever-changing import tariffs, may lead to rising prices and reduced employment. The question facing US Fed officials is whether the price increases are one-time events or will have more long-term effects. These uncertainties have weakened the officials' ability to provide guidance on the monetary policy outlook, forcing them to adopt a wait-and-see attitude.

Harker said, "We are becoming increasingly blind when it comes to key data. We are concerned that the quality of economic data is declining. Uncertainty makes it very difficult to forecast the monetary policy outlook."

The reason for the concerns about data quality is that there have been reports that the Trump administration is cutting resources used to compile the closely watched Consumer Price Index (CPI), which affects things like wage adjustments in union contracts and the setting of social security benefits.

Looking back on his ten-year career at the US Fed, Harker said that the period since Trump resumed the presidency has been more challenging than the pandemic era, when it was clearer, at least initially, what the US Fed needed to do to guide the economy.

Looking ahead, Harker said it is crucial for the US Fed to better explain to the public what it can and cannot do. If it does not do so, its independence may be threatened due to the perception that the US Fed is omnipotent in economic matters.

Harker said, "There is a sense that the US Fed is an omnipotent entity that controls your life, but that is not true. It is not like that, but to dispel this misunderstanding, we must simplify our explanations as much as possible, clarifying what we can do and what we cannot do.""I believe we must convey this message clearly and unambiguously,"

Harker claimed, stating that as the US financial system faces growing challenges, the deficit must be brought under control, and he is "very concerned" about the current state of government finances.

"I am very concerned about the deficit. I don't think we are at risk yet, but if we don't take action, we will be in the near future." The central bank official pointed out that market pricing and leaders on Wall Street have begun to send warning signals that should not be ignored.

Harker also mentioned that other parts of the world are striving to become competitors to the US financial system. He said that when it comes to putting government finances on a sounder footing, "we must work hard to ensure that our finances are in good shape."