LDN - Business

Fed's Harker sees three interest rate hikes in 2017

[January 12, 2017] MALVERN, Pa. (Reuters) - The U.S. economy is gathering enough strength to warrant three interest rate increases this year from the Federal Reserve, Philadelphia Fed President Patrick Harker said on Thursday.

"The economy is displaying considerable strength," Harker said in prepared remarks for a business group in Malvern, Pennsylvania, adding that inflation is accelerating and will hit the U.S. central bank's 2 percent target in 2017 or 2018.

"I see three modest hikes as appropriate for the coming year, assuming the economy stays on track," said Harker.

It was Harker's first speech of 2017, a year in which he will have a vote on the Fed's interest rate policy decisions.

His view on the path for rates appears in line with that of other Fed officials. The Fed said last month when it raised rates by a quarter percentage point that the median forecast of its 17 policymakers was for three further rate increases this year.

Harker said the U.S. labor market was "more or less at full health," although he said he was concerned by the long-term decline in the share of the population that either has a job or is looking for one.

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The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque

Fed officials have been urging the U.S. Congress and president in recent years to do more to build America's economic potential. Measures of the productivity of U.S. workers have sagged over the last decade, a situation economists believe has restrained economic growth.

Fed officials say fixing this problem lies mostly outside their powers.

"The kinds of policies that will deliver that growth — employment programs, development, taxation, and trade policy — is up to elected officials at the local, state, and national levels," Harker said.

(Reporting by Jason Lange; Editing by Chizu Nomiyama)

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