MNI BRIEF: Higher For Longer If Inflation Stuck- Fed's Barkin
MNI (LINTHICUM HEIGHTS, MD.) - Federal Reserve Bank of Richmond President Tom Barkin said Friday he would keep interest rates restrictive for longer if inflation gets stuck but so far the path has been toward 2%.
After a 100-basis point "recalibration" of the benchmark rate in 2024 it would be sensible to cut again if new data show inflation has sustainably fallen to 2% or if weak demand ensured inflation would fall too, he told reporters on the sidelines of a Maryland banking conference.
"One would be real confidence that inflation has now stably gotten down to the 2% target, which we could get from month-over-month inflation rates. A second would be a significant weakening on the demand side of the economy and that that weakening would in time have an impact on inflation," he said.
Despite 12-month inflation rates looking flat over the past several months, Barkin still sees fading underlying price pressures. "The biggest thing I take signal from is the behavior of businesses I’m talking to," he said. "They’ve gotten resistance from consumers and they believe their pricing power is about done."
He hadn't yet incorporated any potential policy changes from the incoming Donald Trump administration, Barkin said, adding "I don't know how to calibrate them." (See: MNI INTERVIEW: Fed Won't Consider Cuts Until March - Benigno)