The core of the economy remains strong but soaring inflation — “the 10% elephant in the room” — will continue to plague the nation and the Delaware Valley in the coming months. And the high prices for gas, heating fuel, food, and other goods have been compounded by the ongoing Russian invasion of Ukraine.
That’s the message Patrick Harker, head of the Federal Reserve Bank of Philadelphia, delivered during a virtual presentation to the Delaware State Chamber of Commerce Wednesday morning.
Harker pledged that the Federal Reserve would take strong action to rein in inflation, predicting “a series of deliberate, methodical [rate] hikes as the year continues and the data evolve.”
Those moves — plus the underlying strength of the economy — and worker shortages led Harker to forecast that even though inflation was 10% in February, it would likely end up at about 4% for the year and should approach “our target of 2%” in 2023 and 2024.
Harker stressed that he was speaking for himself, not the Philadelphia Fed that he has headed since 2015, in his annual address to Delaware business leaders. Harker has strong ties to the state from his tenure as University of Delaware president from 2007 until he took the Fed post.
Harker stressed that while he was “very concerned about inflation,” indicators show that “economic growth and employment are robust” even while the pandemic continues into its third year.
“That this occurred in the midst of a deadly pandemic is quite a testament to the underlying strength of our economy,” Harker said.
Although job growth has topped 400,000 for 11 straight months nationwide, Harker said job openings remain near record levels as millions have retired or not returned to the workforce after being laid off or choosing to stay home to care for family members while COVID-19 raged.
Harker said that, in Delaware alone, total employment “is now about 14,000 jobs below where it was when the pandemic struck.” Nevertheless, “the unemployment rate, which is below 4%, should continue to fall this year,” Harker said.
But his overarching message was that widespread inflation has him “acutely concerned.”
“Russia’s invasion of Ukraine will add to inflation pressure, not only hiking oil and gas prices,” he said, “but other commodities, like wheat and fertilizer.”