Fed's Barkin: Last week's rate hike 'will help' restore price stability, will watch if more hikes are needed

BlockBeats news, September 23, Federal Reserve Bank of Richmond President Tom Barkin warned that the inflation shock may take some time to subside, and there is a risk that elevated inflationary pressures become entrenched.

In a speech detailing his latest outlook on the economy and monetary policy for the FOMC, Barkin said the Fed's rate hike last week will help slow inflation, but he did not send a clear signal on whether further tightening is needed. Instead, the Fed official made clear that supply shocks are no longer one-off or temporary, but are causing persistent price pressures across the economy.

Barkin said: "Where do we go from here? We are committed to bringing inflation back down to our 2% target on a sustainable basis. Last week's rate hike will help. Whether additional hikes are needed, and how many? We will see." Barkin does not have a vote on the FOMC this year.

The Fed official laid out two scenarios for the future path of inflation. The first is that price pressures cool rapidly as recent shocks fade; the second is that inflationary pressures linger.

Barkin said: "I am open-minded that inflation could come down in the near term. Some of the recent shocks may reverse." Consumers may "start to reach their limits," investment may slow, and employment may "soften." "On the other hand, inflation may prove more stubborn. Temporary shocks may drag on longer," he said. "New cost pressures may emerge. Tighter demand conditions may pass through to prices, and the effects of current inflation may also pass through to prices."

In addition, Barkin expressed optimism in his economic outlook. He said: "The economy and labor market remain on solid footing. We hear from businesses that economic conditions are at least stabilizing, if not strengthening further."