Federal Reserve Bank of Richmond President Thomas Barkin said the central bank must continue raising interest rates and hold them at a high level to move inflation lower over time.
(Bloomberg) — Federal Reserve Bank of Richmond President Thomas Barkin said the central bank must continue raising interest rates and hold them at a high level to move inflation lower over time.
“Inflation is likely past peak,” Barkin said at an event at Stanford University. “But I think it will take time to return to target, and, as a consequence, believe we still have work to do.” He is not a voting member of the policy-setting Federal Open Market Committee this year.
US central bankers have raised rates rapidly over the past year to a range of 4.5% to 4.75%. Barkin said there is a case now to “move more deliberately,” potentially signaling that he favors continuing the quarter-point moves that the policy committee downshifted to at its last meeting.
‘Beauty’ of Shallower Hikes
“The beauty of a shallower rate increase path is if you’re wrong you’re not that far wrong,” he told the audience during a question and answer session following his speech.
Still, US inflation remains well above the 2% target, with prices measured by the preferred gauge rising 5.4% in the 12 months through January. Barkin noted that employment and consumption remained strong in the first readings this year.
“The labor market is still quite tight,” he said, noting that the unemployment rate of 3.4% in January stood at a 54-year low. “Returning prices to the stability of the last 30 years will likely take a lot more time and effort.”
He pushed back against a suggestion the Fed raise its inflation target to 3%, saying he didn’t see a case at the moment to do that, particularly at a time when policymakers weren’t meeting the existing goal.
Speaking later with reporters, Barkin declined to spell out how large a rate increase he favors the Fed delivering at its March 21-22 meeting, but he did elaborate a bit on the benefits of moving with deliberation.
“It’s entirely possible that inflation will come down quicker than I’m suggesting that I expect it to, and if it does that would imply a shallower rate path. But I think its entirely possible it persists, which would require us to do more,” he said. “When you’re on a more deliberate rate-increase path it does give you a lot more flexibility in terms of the ability to move for longer or to higher if you need to.”
(Updates with Barkin comment to reporters in final paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.