Two top Fed officials push back against economic doom and gloom


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Cleveland Fed President Loretta Mester and Philadephia Fed President Patrick Harker

Two top Federal Reserve officials on Thursday pushed back on the view that the U.S. economy is sliding inevitably towards a recession. Both officials said they thought weaker growth in the first three months of the year would be temporary.

“There has been a good deal of discussion in recent days and weeks of what some call “disappointing” growth projections. Overall, it’s important to remember that we are still looking at continued economic growth, and are on pace for the longest economic expansion in our history,” said Philadelphia Fed President Patrick Harker, in a speech to business economists.

Harker said his own forecast was for economic growth “a bit above 2% for this year.” Growth might slow to a 1.5% annual rate in the first three months of the year but would “pick up steam” in coming quarters, he added.

“I continue to be in wait-and-see mode, and my outlook for rates remains, at most, one hike for 2019 and one for 2020,” he said.

In a separate speech to a bankers conference in Columbus, Ohio, Mester said the overall economy “is doing well.”

“Growth for the year will be at or slightly above my estimate of 2% trend growth… labor markets will continue to be strong, and that inflation will stay near 2%, aside from the transitory effects of changes in energy prices and the usual volatility in the monthly data,” she said.

Both Harker and Mester said that the next move by the Fed may be to raise interest rates.

Harker said his outlook was for “at most” one rate hike this year and one more in 2020.

Mester did not specify a specific time frame, but agreed “it is possible… the fed funds rate may need to move a bit higher than current levels.”

Investors think the next Fed move will be an interest-rate cut, according to the CME Group’s FedWatch tool.

White House National Economic Council Director Larry Kudlow has called for the Fed to cut its benchmark rate by 50 basis points.

Neither Harker or Mester have a vote this year on the Fed’s interest-rate setting committee.

President Donald Trump is set on nominating former Republican presidential candidate Herman Cain to a seat on the seven-member Fed board, according to a report Thursday.

Read: Trump’s possible pick of Cain to Fed indicates fury at last year’s rate hikes

The president has also said he plans to name Stephen Moore to the central bank board. Both Moore and Caine have called for looser monetary policy.

The Dow Jones Industrial Average

DJIA, +0.53%

 was up over 100 points in afternoon trading.

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