Comments from Richmond Fed’s Barkin cross the wires, followed by remarks from his Q&A:
- The US central bank raised rates last week because risks to inflation outweigh risks to maximum employment.
- Last week’s rate hike will help restore price stability; we’ll see if more hikes are needed.
- Economic conditions are, if anything, firming.
- “Passing” shocks like tariffs and energy are not fading; there is a risk that high inflation today will impact future inflation.
In the Q&A, Barkin added:
- The labor market is not overheated or even particularly tight.
- Don’t see much evidence that consumer balance sheets are stretched.
- Consumers will spend as long as the job market remains healthy.
Analysis: Barkin is keeping the door open to more rate hikes because he sees persistent inflation as the larger risk. At the same time, he is not describing an overheated labor market. That distinction matters: in his view, continued consumer spending can support the economy even without an especially tight jobs market.
For traders, the test is whether inflation stabilizes following last week’s hike. If it does not, Barkin’s comments suggest the Fed could have more work to do. He has not said another hike is certain.
This article was written by Greg Michalowski at investinglive.com.