Richmond's Barkin: Fed To Stay The Course

Richmond Fed President Tom Barkin (2021 FOMC voter, neutral-to-hawkish) reiterated his constructive outlook for the US economy over the course of the year at an event this morning.

• In particular he noted that the economy can return to health "in short order" given a combination of accommodative Fed and fiscal policy, along with use of "excess savings".
• On inflation, he expects there will be higher readings this year amid the above factors stimulating growth, as well as base effects and supply chain issues, but that the structural long-term inflation picture remains benign.
• The Fed will "stay the course" on asset purchases absent "substantial further progress" on inflation - it "makes sense" for the Fed to provide ample accommodation including outcome-based fwd guidance.
• This echoes his previous comments including an FT interview last week in which he said 2021 price rises as temporary and volatile, with broader deflationary trends remaining intact.
• Even though he is considered one of the more hawkish voting members in 2021, these comments largely align with those of Fed leadership on maintaining the course of accommodative policy despite potential temporary upticks in inflation in 2021.
• As such, this reinforces the idea that "transient" inflation in the early months of 2021 will fail to spark a significant rethink on the Fed's policy outlook.