Richmond Fed Pres Barkin: Inflation remains a focus for the Fed

Fed’s Barkin (2024 voter) emphasizes that inflation remains the primary concern for the Federal Reserve

  • Says they are now looking to balance this focus with other aspects of the Fed’s mandate, considering the progress made in reducing inflation.
  • Clarifies that the Fed’s forecasts are not meant to be taken as guidance but are simply projections.
  • Downplays the optimistic Q3 GDP data, noting that his ground-level contacts do not reflect this level of growth.
  • Observations indicate that demand, employment, and inflation are stabilizing and not as excessively high as Q3 data suggested.
  • Remarks on the significant decrease in inflation and anticipates further cooling.
  • Notes that demand is normalizing but not dramatically declining.
  • The Fed is seeking strong evidence that inflation is returning to its target and notes signs of weakening in certain areas of the consumer economy.
  • Regarding potential rate cuts, Barkin states that if inflation decreases as anticipated, the Fed would respond appropriately.
  • Believes inflation is proving to be more persistent than most Fed officials think.
  • Feels that the Federal Reserve is well-positioned given the current economic outlook.
  • When asked about financial market conditions, he comments that the markets will behave independently.

Yesterday in an interview with WSJ Timiraos spoke toward cuts in 2024

  • Interest Rate Cuts Possible in 2024: San Francisco Fed President Mary Daly suggests that the Federal Reserve might need to consider lowering interest rates in 2024 due to the improvement in inflation this year.
  • Alignment with Fed’s Median Projections: Daly’s outlook on interest rates and inflation closely aligns with the median of projections from 19 Fed officials, who anticipate at least three rate cuts next year amid a faster-than-expected decline in inflation.
  • Acknowledging Inflation Progress: Daly acknowledges the progress made in controlling inflation, stating that even with potential rate cuts, the Fed’s benchmark interest rate would remain restrictive.
  • Labor Market Concerns: Daly is closely monitoring the impact of restrictive policies on the labor market, emphasizing the need to balance price stability with job preservation.
  • Fed’s Dual Mandate: Daly highlighted the importance of focusing on both aspects of the Fed’s mandate: controlling inflation and minimizing labor market disruptions.

Since the Fed rate decision last week, officials have dialed back a bit on the rate expectations without not acknowledging the gains they have made. Perhaps, they are concerned about the sharp decline in rates which is a stimulus along with the failure stock prices which are also a stimulus. Both are threats to inflation, and officials are probably concerned about reigniting the inflation expectations.

This article was written by Greg Michalowski at Source