Philadelphia Federal Reserve President Patrick Harker on Thursday signaled strong support for an interest rate cut in September, marking one of the most definitive endorsements of monetary policy easing from a central bank official. Speaking to CNBC at the Federal Reserve’s annual retreat in Jackson Hole, Wyoming, Harker suggested that a rate reduction is highly likely when officials convene next month.
His comments follow the release of minutes from the Fed’s last policy meeting, which indicated growing confidence among officials about the trajectory of inflation and concerns over potential weakness in the labor market. “I think it means this September we need to start a process of moving rates down,” Harker told CNBC’s Steve Liesman during an interview on “Squawk on the Street.” He emphasized the importance of easing rates “methodically and signaling well in advance.”
Market expectations align with Harker’s stance, with a 100% probability of a 25 basis point rate cut and a 25% chance of a 50 basis point reduction. However, Harker remained cautious, stating, “Right now, I’m not in the camp of 25 or 50. I need to see a couple more weeks of data.”
The Fed has maintained its benchmark overnight borrowing rate within a range of 5.25% to 5.5% since July 2023, as it continues to address persistent inflation. Initially, markets reacted negatively when the Fed signaled it had not yet seen sufficient evidence to justify rate cuts. However, recent comments from policymakers, including Harker, indicate that easing may soon be appropriate.
Harker, who does not vote on the Federal Open Market Committee (FOMC) this year, stressed that policy decisions will be driven by data, not political considerations, despite the upcoming presidential election. “Our job is to look at the data and respond appropriately,” he said.
Kansas City Fed President Jeffrey Schmid, another nonvoting member, also hinted at a potential rate cut, citing the cooling labor market as a key factor. While Schmid acknowledged that unemployment has risen gradually, he expressed confidence in the resilience of banks under the current high-rate environment, suggesting that monetary policy is not yet “over-restrictive.”
Harker will next vote on the FOMC in 2026, while Schmid will gain voting rights next year.
