Fed's Barkin says US central bank's direction 'straightforward,' the question is pace, SiriusXM reports
WASHINGTON: Richmond Federal Reserve President Tom Barkin said on Friday that with high inflation and the economy solid, the path of US monetary policy was “straightforward,” but with an open question about the pace of any future rate increases. “Inflation’s high, demand is solid, unemployment is relatively low. So I think the direction of travel is pretty straightforward,” Barkin said on…
Richmond Federal Reserve President Tom Barkin has stated that the US central bank's course of action in response to high inflation and a robust economy is "straightforward." However, the critical issue at hand is the pace of any potential rate increases. During an interview on SiriusXM's Business Briefing, Barkin highlighted that both inflation and demand are solid, with unemployment remaining relatively low.
He reiterated that the Fed's approach should be gradual, which is reasonable given that the economy is not far behind the curve and allows time for learning.
Barkin emphasized that businesses in his district, which encompasses the mid-Atlantic and southeastern regions, are facing rising cost pressures due to factors such as diesel fuel prices, computer chips, and wages for skilled labor. In the context of an economy that has experienced four or five years of elevated inflation, he argued that businesses are compelled to raise prices. Barkin suggested that the lived experience of inflation can impact future inflation levels unless the Federal Reserve takes action.
The Federal Reserve's next move could transpire during their meeting on December 8-9, where market participants anticipate policymakers to approve another quarter-point rate hike. The Fed maintained interest rates at their most recent meeting but released a policy statement indicating that "the accumulation of more information" would aid in determining the appropriate course of action.
This new language was interpreted by many analysts as a hint that further rate hikes are on the horizon, barring an unexpected decline in inflation, which has proven to be more resilient than some policymakers had anticipated.
Recent economic data revealed that economic growth and inflation have been stronger than initially predicted. Despite not being a voting member on interest rate policy this year, Barkin expects to take part in the decision-making process next year as the Fed is expected to continue raising borrowing costs. Investor sentiment regarding the magnitude of rate hikes has evolved, coinciding with a recent dip in equity markets that could potentially influence future consumer spending and alleviate cost pressures.
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