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Philadelphia — If recent research suggesting that natural rates of interest are lower than have historically been the norm is correct, Philadelphia Fed President Patrick T. Harker said it could be time to reevaluate the way the Fed conducts policy. Harker was firm in saying he was not advocating for such a change, merely that the situation warranted more research and an open mind.
“I should be clear that I’m not pushing for any changes, nor do I have any particular change I would prefer,” he said to the audience at an annual conference hosted by the American Economic Association. “But it is a question for the profession itself, and we do need people thinking about this. I’d add that if and when that discussion arises, we need to be seriously considering the various alternatives — whether it’s inflation targeting, price-level targeting, or asymmetric loss functions — and not fixating on one without serious academic debate about the others.”
Harker gave his outlook on the U.S. economy and the likely path of monetary policy during a panel discussion. He called 2018 a year to be in “monitoring” mode and included on his list of things to watch the continued unwinding of the Fed’s balance sheet and the shape of the yield curve.