The Federal Reserve’s decision to increase the interest rate by 0.75 percentage points last week is already showing positive results, according to Philadelphia Fed President Patrick Harker. During a chat with Yahoo Finance on Wednesday, Harker said that there are signs of the U.S. economy already cooling off a bit.
The interest rate hike has caused a softening demand, which, if it continues, could bring down the surging inflation. At the moment, inflation is at a 40-year high and is threatening to push the U.S. economy into recession.
“We are, again, starting to see some signs of demand softening, which is exactly what we want,” said Harker. “We don’t want it to crash. We want to bring the economy into a safe position and in balance with supply and demand.”
The Fed will continue increasing interest rates in the following months to get inflation further under control. Another 75 basis points hike is expected, although Harker says a lower increase might be in order depending on the results.
“If it’s softening quicker than I anticipate, then it may be appropriate to go with a 50,” he explained. “If it’s not, then it’s probably appropriate to go with the 75. But let’s see how the data turns out in the next few weeks.”