MNI: Barkin Says Fed Can Be Patient As Inflation Moderates

Federal Reserve officials are making progress bringing inflation down and can be patient in waiting for evidence of whether the central bank has tightened monetary policy enough, Richmond President Thomas Barkin said Tuesday.

“We have time to see if we have done enough, or whether there’s more work to do,” Barkin said in prepared remarks to The Real Estate Roundtable.

Anecdotal evidence from Barkin's regional business contacts suggests the economy is weakening more than resilient economic data on growth and employment suggests. “I see an economy that is much further along the path to demand normalization than much of the data would tell you. But the path for inflation isn’t yet clear,” he said. “I am still looking to be convinced, both that demand is settling and that any weakness is feeding through to inflation.”

The Fed has raised interest rates since March of last year to a 22-year high of 5.25-5.5%. Officials have left the door open to one additional increase this year but a recent spike on long-term yields appears to be giving many second thoughts.

Barkin said the economy might avoid a downturn despite the Fed’s clampdown because of underlying strength coming out of the pandemic. (See MNI INTERVIEW: Labor Hoarding Improves Odds Of US Soft Landing) “If a recession does come, the economy should find itself less vulnerable. And if it doesn’t come, today’s conservatism can fuel tomorrow’s revival,” he said.