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Patrick Harker, president of the Philadelphia Federal Reserve, said on Thursday that higher interest rates are insufficient to control inflation, so further increases are needed. “We are going to keep raising rates for a while,” the central bank official said in remarks for a speech in New Jersey. “Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year.” It was a reference to the federal funds rate, which is expected to remain between 3% and 3.25 percent for the foreseeable future.

Generally, the markets expect the Fed to approve its fourth consecutive interest rate hike in early November, followed by another in December. The expectation is that the Federal Open Market Committee, of which Harker is a non-voting member this year, will take rates a bit higher in 2023 before settling in a range of around 4.5%-4.75%. Harker indicated that those higher rates would likely stay in place for an extended period. “Sometime next year, we are going to stop hiking rates. At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work,” he said. “It will take a while for the higher cost of capital to work its way through the economy. After that, if we have to, we can tighten further, based on the data.” Inflation is currently running around its highest level in more than 40 years. According to the Fed’s preferred gauge, headline personal consumption expenditures inflation is running at a 6.2% annual rate, while the core, excluding food and energy prices, is at 4.9%, both well above the central bank’s 2% target. “Inflation will come down, but it will take some time to get to our target,” Harker said.

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