Philadelphia Fed President Patrick Harker on Thursday strongly supported a rate cut in September.
Harker, speaking to CNBC at the Fed's annual retreat in Jackson Hole, Wyoming, made the most direct statement yet from a central banker about easing monetary policy when officials meet again in less than a month. It's almost a sure thing.
The day before, minutes from the Federal Reserve's last policy meeting made it clear that interest rates would be cut as officials became more confident about the direction of inflation and hoped to head off any potential weakness in the labor market.
“I think that means we need to start lowering interest rates this September,” Harker told CNBC's Steve Liesman in an interview on “Squawk on the Street.” Harker said the Fed should “methodically ease monetary policy.” , and send signals in advance.”
Harker said that since the market is pricing in a 25 basis point rate cut with 100% certainty, that is, a 25 basis point rate cut, the probability of a 50 basis point rate cut is about one in four.
“Right now, I'm not in the 25-year-old or 50-year-old camp. I need to see a few more weeks of data,” he said.
The Fed has kept its benchmark overnight borrowing rate in a range of 5.25%-5.5% since July 2023 to address lingering inflation concerns. Markets briefly revolted after the July Fed meeting, when officials said they still didn't see enough evidence to begin cutting interest rates.
However, policymakers have since acknowledged that appropriate easing will soon be possible. Harker said that as the presidential election approaches, policy will be developed independently of political considerations.
“I'm very proud to work at the Fed, we are proud technocrats,” he said. “That's our job. Our job is to look at the data and react appropriately. When I look at the data as a proud technocrat, it's time to start lowering rates.”
Harker did not receive a vote this year on the rate-setting Federal Open Market Committee but still spoke out at meetings. Kansas City Fed President Jeffrey Schmid, another non-voter, also offered a less direct view on the future of policy in an interview with CNBC on Thursday. Still, he tends to break forward.
Schmid pointed to rising unemployment as a factor in the development. A severe mismatch between supply and demand in the labor market is fueling inflation, pushing up wages and raising inflation expectations. However, employment indicators have cooled in recent months, with the unemployment rate climbing slowly but steadily.
“The cooling of the labor market has definitely helped, but there's still a lot of work to be done,” Schmid said. “I do believe that relative to the 3.5 percent (unemployment rate) in the past and today's numbers below 4 percent, you have to start Look at this issue more seriously.”
However, Schmid said he believed banks would perform well in a high-rate environment and said he did not view monetary policy as “overly restrictive.”
Harker will be next on the ballot in 2026, while Schmid will be on the ballot next year.