While the inflation data this week was certainly “welcome,” the Federal Reserve should continue to raise its benchmark interest rate until the data show continuous progress on inflation, Richmond Fed President Tom Barkin said Friday.
“We’re happy to see inflation start to move down. I’d like to see a period of sustained inflation under control. And until we do that, I think we’re just going to have to continue to move rates into restrictive territory,” Barkin said in an interview on CNBC.
Asked to define a sustained period of inflation, Barkin pointed to the central bank’s 2% target.
He said he doesn’t want the Fed “to raise rates and lower rates and raise rates and lower rates every time the economy bounces around.”
The better policy is to get inflation down and then talk about rate cuts, he added.
Since March, the Fed has raised its benchmark rate to a range of 2.25%-2.5% from close to zero — the fastest pace of tightening since the early 1980s.
Barkin demurred when asked about the size of a prospective rate hike in September. He said he would make up his mind after seeing the economic data released between now and the next Fed decision day on Sept. 21.
Fed officials are debating whether to raise rates by 0.75 percentage points for the third straight meeting or a slower 0.5 percentage point hike.
The Richmond Fed president downplayed concerns about the outlook for the economy.
“It still seems like the economy is in a fundamentally sound place,” he said.
Stocks
DJIA,
SPX,
were higher on Friday on the better-than-expected inflation data this week. The yield on the 10-year Treasury note
TMUBMUSD10Y,
inched down to 2.87%.
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