MNI BRIEF:Markets Are Still Resilient To Fed Rate Hikes-Barkin

Richmond Fed President Tom Barkin on Friday said he hasn't seen any reason to slow interest-rate hikes or QT due to disorderly markets and he wants to see positive real interest rates, standing firm with FOMC colleagues about the need to curb inflation.

The Treasury market "is not the most liquid it has ever been," he said, but it "does appear to be functioning." The situation in markets is "worth keeping an eye on" he said. "With leverage you never know where it is until it shows up," he added. U.S. two-year Treasury yields have jumped to 4.17% Friday, around the highest since mid-2007, from about 2.5% six months ago, as investors see the Fed sending policy rates even higher.

The Richmond chief said a new report Friday showing the Fed's preferred measure of headline inflation at 6.2% and core at 4.9% signals broad-based pressure. While it is too soon to say what the Fed will do in November as it awaits another CPI release and additional labor market data, positive real interest rates are needed, Barkin said. "I'm focused on inflation in the first instance," he said, and the risk of inflation "festering" is worse than the Fed overdoing rate increases. St. Louis Fed economist Mark Wright told MNI earlier this week it’s too early to say whether U.S. inflation has peaked. (See: MNI INTERVIEW: Too Soon To Say Inflation Peaked- Fed’s Wright)