Richmond Federal Reserve President Thomas Barkin said on Thursday that he is content with the current trajectory set by the FOMC of evaluating whether a 25 bps interest rate hike is required at each meeting. According to Barkin, there is a lot of money available for spending among households.
“The challenge in assessing today’s economy is reconciling the strength of the recent data with the potential for weakness coming from the banking system.”
“Policy will need to be nimble. If inflation persists, we can react by raising rates further. If I am wrong about the pricing dynamics at play, or about credit conditions, then we can respond appropriately.”
“It is possible that tightening credit conditions, along with the lagged effect of our rate moves, will bring inflation down relatively quickly. But I still think it could take time for inflation to return to target.”
“Let me now turn to our most recent meeting. I saw substantial inflationary pressure and a resilient banking system. So, I supported raising rates 25 basis points. I am heavily influenced by the experience of the 70s. If you back off on inflation too soon, inflation comes back stronger, requiring the Fed to do even more, with even more damage. With inflation high, broad-based and persistent, I didn’t want to take that risk.”
“If inflation persists, we can react by raising rates further. It was only a few weeks ago that some were calling for a 50-basis-point increase. And if I am wrong about the pricing dynamics at play, or about credit conditions, then we can respond appropriately.”
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