Has the Federal Reserve done enough to bring inflation back to target, or does it need to do more?
Richmond Fed President Tom Barkin said Thursday that he’s unsure, and it may take some months to decide.
“I’m still waiting for the haze to clear,” Barkin told reporters after a speech in Richmond, Va.
“I will be very interested in whether I can get convinced that there’s still more to do or I can get convinced that we’ve done enough,” Barkin said.
Barkin said that he thinks there is a “plausible story out there” about inflation coming under control. If it doesn’t, Barkin said he is comfortable doing more.
Last week, the Fed held interest rates steady after hiking at 10 straight meetings. Fed Chairman Jerome Powell told Congress this week that a “solid majority” of Fed officials expect two more 25-basis-point rate hikes this year, but he didn’t specify the timing of the moves.
The Richmond Fed president, who will be a voting member of the interest-setting committee next year, is not the only Fed official who has used the metaphor that the Fed is trying to find a path forward in a storm.
Chicago Fed President Austan Goolsbee said Wednesday that the central bank was “in this weird, foggy environment where it’s hard to figure out whether we’ve done enough, how much more needs to be done.”
Atlanta Fed President Raphael Bostic said Wednesday he wants the Fed to hold rates steady through the end of the year to give the central bank time to see how the economy progresses.
Barkin wouldn’t comment about what he would like the Fed to do at its next meeting in late July.
He did say more than once that the Fed will learn more about the economy “over the next few months.”
In his talk with reporters, Barkin made several interesting points about the labor market and the economy:
- Barkin said workers seeking higher wages was not driving prices higher, but said part of the reason the Fed shouldn’t linger in fighting inflation is that if it were to persist, “it might well lead to a greater set of people feeling left behind.”
- The Richmond Fed president said a “fundamental question” for Fed officials will be how much slack will the central bank need to have to bring inflation down to the 2% target. If spending is strong because people have money and jobs, the Fed might need to hike more. But if inflation expectations bring down prices, then the Fed might do less.
- Barkin said that there are some factors about the coming out of the pandemic that have negated the economic impact of the Fed’s rapid rate hikes. One thing that surprised him was how rising rates kept people from putting their homes on the market. And autos remain relatively scarce, so these interest-sensitive sectors have not been hit as hard as they might have.