after little more than a year as president of the philadelphia fed, patrick harker is emerging as a central banker willing to stir things up, challenging his colleagues on interest-rate policy and tackling politically contentious issues such as immigration and free trade. he told reporters on oct. 13 that he advocated raising short-term interest rates at the federal reserve<u+2019>s policy meeting in september, when it decided instead to hold them steady. in a speech the same day, he said allowing more immigration to the u.s. could help the economy<u+2014>touching a hot-button issue in a year when republican presidential candidate donald trump has called for limiting immigration and deporting undocumented immigrants. <u+201c>the u.s. labor market is strong, but participation is waning. our economy needs a boost, and immigration could be the stimulant,<u+201d> mr. harker said. he also spoke last month about the benefits of free trade to the economy<u+2014>taking on the topic when both mr. trump and democratic presidential candidate hillary clinton have come out against the obama administration<u+2019>s proposed trade deal with pacific rim countries. <u+201c>a connected world is a better place, and trade helps far more people than it hurts<u+2014>we just need to find a way for everyone to benefit from that free exchange,<u+201d> mr. harker said in a speech. such comments might seem mild by current campaign standards, but among central bankers<u+2014>a group known for cautious, consensus-seeking academics<u+2014>they were relatively bold. mr. harker is indeed a bit different from his fed colleagues. while most of them hold ph.d.<u+2019>s in economics, his is in civil and urban engineering. he does hold a master<u+2019>s degree in economics. and uniquely among fed officials, he served as a mustachioed fbi special assistant in the early 1990s. like many fed policy makers, however, he has spent a good part of his career in academia. before taking the reins at the philadelphia fed in july 2015, mr. harker was president of the university of delaware from 2007. before that, he served as a dean and a professor at the wharton school of the university of pennsylvania. and like three other fed officials, he has previously been closely connected to investment bank goldman sachs group inc., in his case as a trustee and board member representing shareholders for a selection of investment funds operated by the bank. <u+201c>it<u+2019>s not as though i came to the job with no understanding of the economics that underlie what we do,<u+201d> he said in an interview with the wall street journal on oct. 13. mr. harker said his time as an engineer is central to how he thinks about monetary policy. <u+201c>i tend to be more of a pragmatist,<u+201d> mr. harker said. <u+201c>you come into this understanding that while we have a deep bench of theorists and empiricists that need to inform policy, at the end of the day you need to base your judgment not on an ideology, but on the facts on the ground, right, as best we know them.<u+201d> mr. harker said the best path for rate rises will be driven by economic theory and what the data tell policy makers about the economy<u+2019>s reaction to higher borrowing costs. <u+201c>you should have a lot of humility to say we really don<u+2019>t know exactly what<u+2019>ll happen. that<u+2019>s why we move cautiously, but move, to see what happens,<u+201d> he said. he hasn't yet served as a voting member of the central bank<u+2019>s rate-setting committee, but will next year under its rotation system. the group voted 7-3 in september to hold its benchmark short-term rate steady in a range between 0.25% and 0.5%, and signaled it expects to raise it by year<u+2019>s end. officials are likely to leave it unchanged at their november meeting, which comes just a week before the u.s. presidential election. their final scheduled meeting this year is dec. 13-14. mr. harker said he agreed with the dissenters at the september meeting who wanted to raise the benchmark rate then by a quarter-percentage point. <u+201c>there are risks of hanging around zero too long. and if the economy can withstand it, i think it<u+2019>s appropriate to move,<u+201d> he said. his comments suggest he is more a <u+201c>hawk<u+201d> than a <u+201c>dove<u+201d> on the fed policy spectrum, putting him in the minority camp of officials who think the central bank should have started raising borrowing costs by now to prevent the economy from overheating. they worry if they hold off too long, inflation and asset bubbles could build, forcing them to raise rates more aggressively in the future, which could curb growth and hiring. the doves, in contrast, want to wait a while longer to let the labor market and inflation gather more steam. he rejects the labels, saying jokingly that he is more an <u+201c>eagle,<u+201d> a reference to philadelphia<u+2019>s football team. time will tell how much impact mr. harker has on fed policy. tim duy, an economics professor at the university of oregon, said <u+201c>the policy power rests<u+201d> at the board of governors in washington. <u+201c>that means it takes a certain level of intellectual stature for regional presidents to actually influence policy decisions.<u+201d> mr. harker was no central bank neophyte when he was tapped to helm the philadelphia fed. he had served on its board of directors before becoming president, including during its search for a new chief. he said in the interview that the central bank benefits from having leaders with varied backgrounds. he said, for example, his service on corporate boards has given him insights into how fed policies affect decision-making at firms. he said the fed has the tools it needs to confront the next economic downturn, and he doesn<u+2019>t support lifting its 2% inflation target. mr. harker also would like to see the philadelphia fed help address economic problems in its district and propose solutions. toward that end, the bank is launching a research project called the agenda on poverty and prosperity. <u+201c>we can do the research that lays out the parameters of what most likely will and won<u+2019>t work, right, and the costs and benefits of those,<u+201d> he said in the interview. write to michael s. derby at michael.derby@wsj.com
fed<u+2019>s harker shows willingness to challenge prevailing views - wsj
michael s. derby