Richmond Fed’s Barkin sees interest rate path uncertain, warns of inflation risks

Richmond Fed President Tom Barkin today emphasized that the Fed faces a delicate balance in guiding the U.S. economy to a soft landing amid an uncertain interest rate path and persistent inflation risks. Barkin noted in a speech in Raleigh that while real-time economic data will guide future interest rate decisions, the potential for further rate hikes remains if the economy remains strong.

Barkin’s comments came as his Federal Open Market Committee (FOMC) kept interest rates steady and forecast a three-quarters of a percentage point cut next year. However, he acknowledged that further interest rate hikes may be necessary if strong demand continues to fuel inflation.

Barkin recently mentioned personal consumption expenditures (PCE) inflation, which rose 2.6% year-on-year in November. Even more encouraging is that six-month inflation is moving closer to target, with the Fed targeting 1.9%.

There were changes in financial markets in response to Barkin’s speech, most notably a rise in the yield on the 10-year Treasury note.

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