Hawkish remarks by Fed’s Harker benefit the US dollar

The USD was not greatly affected by the Wednesday’s US home data, but the DXY Index recorded gains of 0.35% per day after Fed’s Harker commented that the bank won’t cut rates right away.

Philadelphia Federal Reserve President Patrick Harker has expressed his opposition to further US central bank interest rate hikes, but is open to lowering short-term borrowing costs.

Before increasing rates, he advised keeping them the same for a while and watching the results. He did, however, stress the significance of lowering rates and noted that it will take time to accomplish.

Following the Fed’s decision to keep its benchmark overnight interest rate between 5.25% and 5.50% while simultaneously planning rate reductions in 2024, Harker made his first remarks.

Harker participated in the Federal Open Market Committee voting this year, but he will not be able to do so in the future because of his 2025 necessary retirement. Leading Federal Reserve officials, including Harker, felt that the Fed had raised interest rates far enough and that more time was required to observe how the sharp increases in borrowing costs were manifesting in the

Dollar demand was stimulated by concerns in the Middle East, but the Federal Reserve’s dovish position might slow the bull’s progress. The Fed’s decision last week indicated no rate hikes in 2024 and plans for a 75 bps of easing due to cooling inflation levels.

However, the central bank’s expectations may be sensitive to incoming data, such as the Q3 GDP due on Thursday and the release of November’s Personal Consumption Expenditures (CPE) Price Index.

The National Association of Realtors reported a modest increase in US Existing Home Sales in November, slightly defying expectations.

In the radio interview, Harker said a “soft landing” for the economy in which a recession is avoided, inflation returns to 2% and the job market is not badly damaged is quite possible. He said he expects unemployment to rise modestly, but added that companies are having better luck finding workers. One reason to lower rates, Harker said, is to help businesses that are struggling with expensive borrowing rates.