Federal Reserve

Fed could be finished hiking rates by 2019, Philadelphia's Harker says

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Key Points
  • Philadelphia Fed President Patrick Harker favors three interest rate hikes in 2018 and three more in 2019.
  • After that, the central bank official said, the Fed might pause as the economy reaches a state of equilibrium
  • Markets widely expect three rate increases this year but are divided on the possibility of a fourth.

Interest rate hikes could come to an end for this cycle in 2019, Philadelphia Fed President Patrick Harker said Thursday.

One of the more hawkish central bankers when it comes to monetary policy, Harker said he envisions a scenario where the Federal Reserve increases its benchmark overnight rate three times total in 2018 and three more times next year, then stops as the economy hits equilibrium.

"I think we're getting close to neutral," he told CNBC's Steve Liesman in a live interview from Dallas. "If we see inflation start to accelerate, then I would be open to a fourth increase this year. But I'd have to see evidence of that first."

The policymaking Federal Open Market Committee, of which Harker is a nonvoting member this year, approved a quarter-point rate hike in March and is widely expected to add another in June and one more in September. Whether the committee approves a fourth rate rise in December remains an open question, with traders currently assigning it a 39 percent chance.

Policy doves, who favor lower rates, seemed to get a boost Wednesday, when minutes from the most recent FOMC meeting indicated that officials would be willing to let inflation run above the Fed's 2 percent target for a temporary period.

Harker said he, too, would consider that, though it would depend on conditions.

"I don't think of it so much as a number around 2 percent, although that's part of it," he said during the "Power Lunch" interview. "It's the acceleration or deceleration. If we're creeping up to 2 percent and we creep up to, say, 2.25 percent, that's a different story than [if] we're accelerating past 2 percent. I think we'd behave differently. At least I would as a policymaker."

Fed officials were in Dallas for a conference on technology and disruption.