The economy is going to be all right, and the could Fed could raise rates twice this year, according to Patrick T. Harker, president of the Federal Reserve Bank of Philadelphia.
“For the most part, economic fundamentals appear to be solid, personal income growth has been healthy, job growth continues — albeit with some volatility — at a healthy pace, and there has been a modest increase in equity prices and continued steady growth in home prices,” Harker said in a speech in Philadelphia yesterday.
He said inflation might reach the target of 2 percent next year, and the Fed may hike rates two times this year,
He added consumers appear confident and there has been a healthy pickup in consumption.
“It appears the GDP is growing above its trend rate, reversing what was a weak first quarter,” he said.
Harker said part of that first-quarter weekly was due to seasonal adjustment problems with measured GDP. “The U.S. economy appears to be on fairly firm footing this year."
Harker predicted 2 percent growth this year that will increase to roughly 2.3 percent in both 2017 and 2018, but he volatility in job growth could affect that. He said average hourly earnings have increased a a 2.5 percent annualized rate over the past three months and companies report finding skilled workers increasingly difficult.
He said the energy and manufacturing sectors continue to struggle, especially durable goods, and orders in April and May did not point to any near-term strength in investment.
The uncertainty around Brexit could cause problems for that struggling manufacturing sector, but he doesn’t expect it to be a large factor, Harker said.