MNI: Barkin Says Fed Has Time To Gain Confidence For Cuts

Richmond Fed President Thomas Barkin said Monday a strong job market and some stickiness in inflation mean the Federal Reserve can be patient before starting to lower interest rates.

“The recent data whiplash has only confirmed the value of the Fed being deliberate. The economy is moving toward better balance, but no one wants inflation to reemerge,” he said in prepared remarks.

“We want to gain greater confidence that inflation is moving sustainably toward our 2% target. And given a strong labor market, we have time to gain that confidence.”

Barkin is hopeful the cumulative effects of monetary policy are gradually putting downward pressure on demand in a way that can help lower inflation toward the Fed’s 2% target. Still, he admitted there are lingering upside frictions to cost pressures.

“The risk is that as we get less help from the goods sector, continued shelter and services inflation will leave the overall index higher than our target. That’s what we’ve seen so far this year,” Barkin said.

“I’m optimistic that today’s restrictive level of rates can take the edge off demand in order to bring inflation back to our target. While I don't see the economy overheating, the Fed knows how to respond if it does. And if the economy slows more significantly, the Fed has enough firepower to support it as necessary.” (See MNI INTERVIEW: Fed To Cut At Most Once This Year-Ghamami)