Fed’s Harker, Bullard voice support for hike

Two Fed Reserve bank presidents voiced their support for a rate increase in the near term during Friday speeches.

In his first public comments on monetary policy since becoming the Philadelphia Federal Reserve president, Patrick Harker said he would like to see rates raised sooner rather than later.

The U.S. Federal Reserve risks losing its credibility and only adds uncertainty to the economic landscape the longer it takes to normalize policy, he said in prepared welcome remarks before "The New Normal for the U.S. Economy" forum hosted by the Philadelphia Fed.

Harker explained his view that, with an early start, the Fed can better ensure that monetary accommodation is removed gradually and that inflation returns to the central bank's 2 percent target smoothly.

Saquan Stimpson | AP

Patrick Harker

"Therefore, raising rates this year will, in my view, serve to reduce monetary policy uncertainty and to keep the economy on track for sustained growth with price stability," he added.

The Philadelphia Fed president will become an alternate member of the Federal Open Market Committee in 2016, and he is slated to be a voting member in 2017.

St. Louis Fed President James Bullard, who is also not currently a voting member of the FOMC, voiced his support for an upcoming rate hike in a Friday afternoon speech.

He said the Fed has met its goals (including the inflation target, excluding oil), but policy remains extreme. The St. Louis Fed president also suggested that the Fed balance sheet should be reduced.

On the U.S. economy, Harker said he projects steady and modest growth going forward.

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The U.S. generated a better than expected 211,000 jobs in November, leading many to expect that the Fed will hike interest rates later this month.

Fed fund futures indicated a 79 percent chance of a rate increase when the FOMC meets Dec. 15-16. The level was little changed from Thursday.

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota also spoke Friday, arguing against rules-based policy, alleging that following the Taylor Rule may have cost millions of jobs. That rule seeks to prescribe what the federal funds rate should be based on GDP and inflation.

—CNBC's Jeff Cox contributed to this report.