After little more than a year as president of the Philadelphia
Fed, Patrick Harker is emerging as a central banker willing to stir
things up, challenging his colleagues on interest-rate policy and
tackling politically contentious issues such as immigration and
free trade.
He told reporters on Oct. 13 that he advocated raising
short-term interest rates at the Federal Reserve's policy meeting
in September, when it decided instead to hold them steady.
In a speech the same day, he said allowing more immigration to
the U.S. could help the economy—touching a hot-button issue in a
year when Republican presidential candidate Donald Trump has called
for limiting immigration and deporting undocumented immigrants.
"The U.S. labor market is strong, but participation is waning. Our
economy needs a boost, and immigration could be the stimulant," Mr.
Harker said.
He also spoke last month about the benefits of free trade to the
economy—taking on the topic when both Mr. Trump and Democratic
presidential candidate Hillary Clinton have come out against the
Obama administration's proposed trade deal with Pacific Rim
countries.
"A connected world is a better place, and trade helps far more
people than it hurts—we just need to find a way for everyone to
benefit from that free exchange," Mr. Harker said in a speech.
Such comments might seem mild by current campaign standards, but
among central bankers—a group known for cautious, consensus-seeking
academics—they were relatively bold.
Mr. Harker is indeed a bit different from his Fed colleagues.
While most of them hold Ph.D.'s in economics, his is in civil and
urban engineering. He does hold a master's degree in economics. And
uniquely among Fed officials, he served as a mustachioed FBI agent
in the early 1990s.
Like many Fed policy makers, however, he has spent a good part
of his career in academia. Before taking the reins at the
Philadelphia Fed in July 2015, Mr. Harker was president of the
University of Delaware from 2007. Before that, he served as a dean
and a professor at the Wharton School of the University of
Pennsylvania. And like three other Fed officials, he has previously
worked for investment bank Goldman Sachs Group Inc.
"It's not as though I came to the job with no understanding of
the economics that underlie what we do," he said in an interview
with The Wall Street Journal on Oct. 13.
Mr. Harker said his time as an engineer is central to how he
thinks about monetary policy.
"I tend to be more of a pragmatist," Mr. Harker said. "You come
into this understanding that while we have a deep bench of
theorists and empiricists that need to inform policy, at the end of
the day you need to base your judgment not on an ideology, but on
the facts on the ground, right, as best we know them."
Mr. Harker said the best path for rate rises will be driven by
economic theory and what the data tell policy makers about the
economy's reaction to higher borrowing costs. "You should have a
lot of humility to say we really don't know exactly what'll happen.
That's why we move cautiously, but move, to see what happens," he
said.
He hasn't yet served as a voting member of the central bank's
rate-setting committee, but will next year under its rotation
system. The group voted 7-3 in September to hold its benchmark
short-term rate steady in a range between 0.25% and 0.5%, and
signaled it expects to raise it by year's end. Officials are likely
to leave it unchanged at their November meeting, which comes just a
week before the U.S. presidential election.
Their final scheduled meeting this year is Dec. 13-14.
Mr. Harker said he agreed with the dissenters at the September
meeting who wanted to raise the benchmark rate then by a
quarter-percentage point. "There are risks of hanging around zero
too long. And if the economy can withstand it, I think it's
appropriate to move," he said.
His comments suggest he is more a "hawk" than a "dove" on the
Fed policy spectrum, putting him in the minority camp of officials
who think the central bank should have started raising borrowing
costs by now to prevent the economy from overheating. They worry if
they hold off too long, inflation and asset bubbles could build,
forcing them to raise rates more aggressively in the future, which
could curb growth and hiring. The doves, in contrast, want to wait
a while longer to let the labor market and inflation gather more
steam.
He rejects the labels, saying jokingly that he is more an
"eagle," a reference to Philadelphia's football team.
Time will tell how much impact Mr. Harker has on Fed policy. Tim
Duy, an economics professor at the University of Oregon, said "the
policy power rests" at the board of governors in Washington. "That
means it takes a certain level of intellectual stature for regional
presidents to actually influence policy decisions."
Mr. Harker was no central bank neophyte when he was tapped to
helm the Philadelphia Fed. He had served on its board of directors
before becoming president, including during its search for a new
chief.
He said in the interview that the central bank benefits from
having leaders with varied backgrounds. He said, for example, his
service on corporate boards has given him insights into how Fed
policies affect decision-making at firms.
He said the Fed has the tools it needs to confront the next
economic downturn, and he doesn't support lifting its 2% inflation
target.
Mr. Harker also would like to see the Philadelphia Fed help
address economic problems in its district and propose solutions.
Toward that end, the bank is launching a research project called
the Agenda on Poverty and Prosperity.
"We can do the research that lays out the parameters of what
most likely will and won't work, right, and the costs and benefits
of those," he said in the interview.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
October 26, 2016 09:25 ET (13:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Apr 2023 to Apr 2024
