© Reuters. FILE PHOTO: Federal Reserve Bank of Richmond President Thomas Barkin poses in the lobby of Jackson Lake Lodge in Jackson Hole, where the Kansas City Fed holds its annual economic symposium, in Wyoming, U.S., August 24, 2023. REUTERS/Ann Saphir/File Photo
(Reuters) – Richmond Federal Reserve Bank President Thomas Barkin on Wednesday said he is “skeptical” that inflation is on its way down to 2%, and wants the option of another rate hike in case inflation gains steam.
“There’s no particular need to do anything with interest rates if inflation is coming down,” Barkin said in an interview on CNBC. “But if inflation is going to flare back up, I think you want to have the option of doing more on rates.”
Some of Barkin’s colleagues at the Fed have said they are feeling more confident that inflation is on the path to 2%, a view that strengthens the argument for leaving the Fed policy rate in its current 5.25%-5.50% range.
“I’m still in the ‘looking to be convinced’ category, rather than the ‘convinced’ category,” Barkin said.
Financial markets are pricing in no further rate hikes. Traders expect that interest-rate cuts will start by May of 2024, and see the policy rate ending next year more than a full percentage point below where it is currently, based on interest-rate futures pricing.
To Barkin, that’s a bet on a much easier path downward for inflation than he expects, especially given strong economic growth that he feels is encouraging businesses to continue to try to raise prices.
“If you believe as I believe that inflation is going to be stubborner than I would like it to be, then I think talking about reducing rates at this point is premature,” he said.
