Fed’s Harker says it’s still a 2 percent growth economy until we see some change on the fiscal side

The U.S. will remain stuck in growth around 2 percent until lawmakers come up with a tax plan to boost the economy, Philadelphia Fed President Patrick Harker said Thursday.

“Until we see some other changes on the fiscal side of the house, we’re not going to move that growth rate too much,” Harker said CNBC in an interview on “Squawk Box.”

Harker said GDP growth will be “slightly above 2” percent until more details emerge from the final version of the GOP tax overhaul. Under the current proposal, the administration wants to slash corporate taxes, reduce tax brackets for individuals and cut taxes for the middle class.

President Donald Trump says the plan will bring at least 3 percent growth to economy that has struggled to break out since the financial crisis. Second-quarter growth came in 3.1 percent, though the first quarter was just 1.4 percent.

However, critics say the current version is too focused on providing breaks for the wealthiest taxpayers and not enough on relief for the rest.

Harker is a voting member of the central bank’s policy-setting Federal Open Market Committee.

Despite his views on tepid growth ahead, he still believes the committee should enact a rate hike later this year, which would mark the third time the Fed has moved in 2017.

“We have to see how the inflation dynamics play out,” he said. “I think we have to realize that while there are issues here, particularly with respect to low inflation … it’s not a horrible situation.”

In addition to one more hike this year, Harker believes the Fed will remain on a fairly aggressive path in 2018.

“I still have three rate hikes in for next year,” he said. “But again, we’ll have to see how the dynamics play out.”
Source: CNBC

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