Fed’s Harker open to two more rate hikes in 2018 but not convinced

(Reuters) – A top Federal Reserve official said on Thursday that a faster rate of inflation would convince him to back two more interest-rate hikes this year, but there is no reason to jump to that conclusion in part because of the risk of inverting the U.S. Treasury yield curve.

The Fed has already hiked rates twice in 2018 and a third is widely expected. “I am open to a fourth increase this year if we do see inflation start to accelerate,” Philadelphia Fed President Patrick Harker said at the Rocky Mountain Economic Summit in Victor, Idaho.

But he needs “more evidence” before changing his mind in part because it could push 2-year Treasury yields above that of 10-year notes. “If there is a risk of inverting the yield curve then we should try to avoid that,” he added. “There is no compelling reason right now why we need to have that fourth increase, unless we see inflation start to accelerate rapidly.”

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