Rate Hikes No More? Philly Fed's Harker Says Fed Has Done Enough

Federal Reserve Bank of Philadelphia President Patrick Harker talked about the state of the consumer and gave his read on the economy Thursday morning at the Jackson Hole Symposium. 

What To Know: We are seeing strong GDP growth alongside declining inflation and low unemployment, but it's not the first time this has occurred, Harker said Thursday in an CNBC interview at Jackson Hole.

"Where have we seen this before? Before the pandemic," Harker said. 

There's clearly been a tightening of credit standards and credit card delinquencies are starting to tick up, but they are still not where we were before the pandemic, he said. 

"Now, if it gets worse than that, then we'd start to worry," Harker said. 

The Philly Fed president is keeping an eye on the 10-year yield, but he isn't overly concerned, he said, adding there are a lot of factors that go into the yield curve beyond monetary policy.

The Fed is seeing a softening of some demand trends, particularly from the low-income consumer, Harker said. Eventually he expects to see more of a broader slowdown in the economy.

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It's likely going to take a couple of years to get back to 2% inflation, but the Fed's stance is restrictive and Harker said it should stay that way for a while, but that doesn't mean hiking further. He suggested the Fed has probably done enough.

"Again, we are in a restrictive stance. Do we have to keep going even more and more restrictive? I'm in the camp of let the restrictive stance work for a while. Let's just let this play out for a while and that should bring inflation down," Harker said. 

Based on what he's hearing, a majority of banks and business leaders are in the same camp, harker said, adding he's also been hearing that unemployment is climbing despite claims data remaining relatively steady. 

Harker believes the labor market needs to soften some, particularly in services. It's OK if unemployment rises to around 4% or slightly higher. That's a pretty "normal rate," he said. 

Several Fed speakers are making the rounds Thursday, but everyone is really waiting to hear from Fed Chair Jerome Powell. Powell is set to give his annual speech at Jackson Hole Friday morning at 10:05 a.m. His commentary is likely to move markets one way or the other. The SPDR S&P 500 (ARCA: SPY) was trending lower Thursday, down 0.78% at last check.

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