The President of the Federal Reserve Bank of Philadelphia Patrick Harker warned on Fed’s inflation target miss but supports another rate hike later this year. Speaking at the European Economics and Financial Center in London, Mr. Harker said, while the weakness in this year’s inflation is likely to be temporary, it would take much longer for the inflation to reach Federal Reserve’s 2 percent inflation goal. The US Federal Reserve hikes interest rates thrice in the last three-quarters and Mr. Harker is maintaining his outlook for another hike later in the year.

The financial markets are currently pricing a third rate hike in December with 57 percent probability. Earlier this month along with a hike of 25 basis points, Fed has unveiled plans to begin actual tapering at $10 billion per month, which would gradually increase over time to reach the maximum limit of $60 billion per month. Some analysts have predicted that Fed tapering to begin as early as September.

The US dollar has suffered a major decline yesterday as the European Central Bank (ECB) chief indicated that the central bank is closing in to begin its tapering. The selloff intensified after comments from Mr. Harker warning on inflationary front.

The dollar index, which is the value of the dollar against a basket of currencies declined close to a percent yesterday and is down further by 0.3 percent today. The index is currently at 95.89.

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