US Fed Harker: "September Rate Cut to Begin... Size Depends on Data"

President of the Philadelphia Fed

Patrick Harker, President of the Philadelphia Federal Reserve Bank, hinted at a rate cut in September.

In an interview with CNBC on the 22nd (local time), President Harker stated, "We need to start the process of lowering rates in September," adding, "The U.S. Federal Reserve (Fed) should systematically ease monetary policy and send sufficient signals in advance."

He emphasized, "Our job is to look at the data and respond appropriately," and said, "As a proud Fed technocrat, when looking at the data, it is time to start cutting rates."

Following the release of the July Federal Open Market Committee (FOMC) minutes the previous day, President Harker's remarks have further solidified expectations for a rate cut in September. According to the minutes, the majority of Fed officials viewed a rate cut in September as appropriate, with many already advocating for a cut in July.

However, President Harker said that more data needs to be reviewed regarding the size of the September rate cut.

He stated, "I am not currently leaning toward either 25 basis points (bp, 1bp=0.01 percentage points) or 50bp," and added, "We need to see more incoming data over the next few weeks."

He explained that after reviewing inflation and employment indicators before the FOMC meeting scheduled for the 17th-18th of next month, the Fed will decide on a 'baby cut' (25bp rate cut) or a 'big cut' (50bp rate cut). In particular, the U.S. Department of Labor's August employment report to be released on the 5th and the August Consumer Price Index (CPI) data to be released on the 11th are expected to have a decisive impact on the Fed's rate cut size.

President Harker does not have voting rights at this year's FOMC but can express his opinions on monetary policy during meetings.