By Michael S. Derby
(Reuters) -As he heads toward retirement at month’s end, Philadelphia Federal Reserve President Patrick Harker says interest rate cuts remain a possibility this year amid a very uncertain economic landscape, as he also flagged worries about the quality of economic data policymakers use to make their decisions.
When it comes to easing monetary policy, “it’s possible, I would never take it off the table,” Harker said in an interview with Reuters on Thursday. “If the signals are such that inflation doesn’t look like it’s moving rapidly north, but unemployment does then, yeah, I could definitely see making one or more cuts this year, but it’s hard to say at this point.”
Harker was interviewed in the final weeks of his tenure, as he’s set to retire at the end of June after taking the reins of the Philadelphia Fed in 2015. The Fed next meets on June 17-18 when it is universally expected to hold its interest rate target steady at between 4.25% and 4.5%.
What happens later in the year is up in the air, as the Trump administration’s chaotic trade policy featuring ever-changing high import taxes will likely drive up inflation and lower employment. The question facing Fed officials is whether the inflation rise is a one-off or the makings of something more enduring. Those uncertainties have blunted officials’ ability to provide guidance on the monetary policy outlook and have pushed them into signaling a wait-and-see attitude.
Harker, an engineer by training who led the University of Delaware before coming to the Fed, said in the interview that he was increasingly worried about the quality of the data policymakers in general rely on.
Data, including that produced by the government, is “not good. It’s not getting better,” Harker said. “It’s not just inflation data but a whole host of data, so we’re increasingly flying blind, or at least half blind.”
Harker’s worries about the state of data come in the wake of reports the government was cutting back on resources devoted to compiling the closely watched consumer price index, which provides a critical reading that informs things like the wage changes in union contracts and the setting of social security benefits.
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
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