By Lindsay Dunsmuir
PHILADELPHIA (Reuters) - The Federal Reserve should wait for more evidence that U.S. inflation is progressing back toward 2 percent before raising interest rates again, Philadelphia Fed President Patrick Harker said on Tuesday.
"Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike," Harker said in prepared remarks to a local business group in Philadelphia.
In a speech similar to one he gave last month, Harker also said that if the fundamentals of the U.S. economy remain sound and a further firming of inflation is sparked as the unemployment rate falls, "policy can truly normalize" in the second half of the year.
Slower Chinese growth and the high value of the dollar create some downside risk to his predictions, he said.
The U.S. central bank as a whole is currently more cautious about when the next interest rate move will be, following the hike last December that was the first in almost a decade.
Harker provided a cautiously upbeat assessment of the U.S. economy, noting that he did not believe that there has been any unanchoring in inflation expectations, a topic that has vexed some Fed policymakers.
However, noting that the Fed has been below target on its 2 percent target rate on inflation for all but two years since 2008, Harker added "it may be worth erring on the side of accommodation" to ensure the Fed's credibility.
Harker, who has been in the post for nine months, rotates into a voting position on the Fed's rate-setting committee next year.
Investors currently see the Fed standing pat on interest rate hikes until at least December, according to an analysis of fed funds futures contracts by CME Group (NASDAQ:CME).
The Fed's next policy meeting is on April 26-27.