Philadelphia Fed President Harker suggests an interest rate reduction in September.

• Philadelphia Federal Reserve President Patrick Harker gave a strong endorsement for an interest rate cut.
• Harker informed CNBC that he believed the statement implied that we must begin lowering rates in September.
• Kansas City Fed President Jeffrey Schmid spoke to CNBC and suggested a possible policy cut, although he took a more indirect approach.

On Thursday, Philadelphia Federal Reserve President Patrick Harker gave a strong endorsement for an interest rate cut in September.

At the Fed's annual retreat in Jackson Hole, Wyoming, Harker stated that monetary policy easing is almost certain when officials meet again in less than a month.

The Fed's position, which was announced a day after the last policy meeting, suggests a cut in interest rates is likely, as officials become more confident about the direction of inflation and seek to prevent any potential economic downturn in the labor market.

"Harker stated on CNBC's "Squawk on the Street" that he believes the Fed should start lowering rates in September and do so methodically while providing clear signals in advance."

Harker stated that with a 100% certainty of a quarter percentage point, or 25 basis point, cut and a 1-in-4 chance of a 50 basis point reduction, it is still uncertain in his mind.

He stated that he is not currently part of the 25 or 50 group and requires additional data for a few more weeks before making a decision.

Since July 2023, the Fed has kept its benchmark overnight borrowing rate within the range of 5.25%-5.5% in an effort to address the ongoing inflation issue. However, markets experienced a brief rebellion following the July Fed meeting, as officials indicated that they had not yet seen sufficient evidence to begin lowering rates.

As the presidential election approaches, policymakers have acknowledged that it will soon be appropriate to ease restrictions. Harker stated that policy will be made independently of political concerns.

""As a proud technocrat, my job is to analyze data and make informed decisions. When I examine the data, I realize it's time to lower rates," he stated."

Although Harker does not have a vote on the rate-setting Federal Open Market Committee this year, he still has input at meetings. Similarly, Kansas City Fed President Jeffrey Schmid, another nonvoter, spoke to CNBC on Thursday and expressed a preference for a policy cut, albeit in a less direct manner.

The unemployment rate has been steadily increasing due to a severe supply-demand mismatch in the labor market, which has led to rising inflation and higher wages.

"Schmid stated that while the labor market is cooling down, there is still work to be done. He emphasized the need to examine the current unemployment rate of around 4% more closely in comparison to the 3.5% rate from earlier."

Schmid stated that he believes banks have performed well under the high-rate environment and does not believe monetary policy is "overly restrictive."

In 2026, Harker will vote, while Schmid will get a vote next year.