(Jan 12): Federal Reserve Bank of Philadelphia President Patrick Harker said the central bank should lift interest rates in quarter-point increments “going forward” as it approaches the end point in its most aggressive tightening campaign in decades.

“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed,” Harker said in prepared remarks Thursday for an event in Malvern, Pennsylvania. “In my view, hikes of 25 basis points will be appropriate going forward.”

Fed officials lifted rates by a half-point last month, slowing the pace of rate increases after four straight 75-basis-point moves. The rate hike brought the target on the Fed’s benchmark rate to a target range of 4.25% to 4.5%, up from near zero levels in March.

Fed officials see interest rates rising above 5% this year and staying there until 2024, according to projections released by policymakers last month. Other Fed officials have also said they are open to making a more incremental 25-basis-point rate increase at their next meeting ending Feb 1, depending on the data. But policymakers stress the central bank still has more work to do to tame prices and are not anticipating rate cuts this year.

Harker, who votes in monetary policy decisions this year, reiterated that officials expect to hold rates at higher levels to give them time to travel through the economy. “At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place to let monetary policy do its work,” he said.

The Fed official said he is not forecasting a recession, though he does expect the US economy to grow by about 1% this year before rising to “trend growth” of about 2% in 2024 and 2025. He expects the unemployment rate to rise to about 4.5% this year before dropping to 4% over the next two years.

Answering questions after his speech, Harker was a bit more explicit about how much higher he favours raising rates.

“I’ve been in the camp that we need to get rates above 5%. How far above? We’ll let the data dictate that,” he said. “But I don’t think we need to get much further than 5% at this point. And then sit for a while so that we’re not causing undo harm to the labour market.”

Harker said he was also in the “camp of being cautious” who prefer to move carefully to avoid unnecessary damage to employment.

“I don’t think we have to overdo the monetary policy response,” he said, while adding that Americans also need to understand that inflation is going to take a couple of years to get back down to the Fed’s 2% target.

“I think we have to just accept that. But as long as it’s moving in the right direction, we’re making progress,” he said. “As long as we’re getting, moving in the right direction, I think we should be more cautious than more aggressive.”