HARKER EYES INFLATION

source: https://www.cnbc.com/2017/11/12/harker-eyes-inflation-stands-by-fed-rate-hike-next-month.html

This article speaks heavily on the expectation of an interest rate increase. However, Fed officials are worried about the below average inflation. People worry that raising interest will actually cause inflation to go lower then it already is.

One argument is from Patrick Harker, president of the Philadelphia Federal Reserve Bank, he believes that the country must be prepared for a future economic shock and by raising interest rates, we start to constrict the economy a little. He believes that the economy is basically at full strength and the labor market is going strong, however, as we have seen in the past, we could sense a correction or recession in the economy in the coming years. Harker is worried about the low inflation, as it has been a cautionary measure in the past.

It will be really interesting to see if these interest rate hikes will have any effect on inflation. Theoretically, interest rate hikes should decrease inflation. I wonder how well theoretics will match up to reality. I expect the Fed may have to make some changes when it comes to monetary policy as this low inflation could cause the economy and the labor market a problem in the coming years. They may have to take a different approach and figure out other ways to bump inflation up to their target level of 2%.