Despite positive inflation data this week, Richmond Federal Reserve Chairman Thomas Barkin said on Friday that further rate hikes were needed to contain price pressures.
Releases this week showing that consumer and wholesale price increases had moderated in July are “very welcome,” Barkin said in a live interview with CNBC’s Squawk on the Street.
“So we’re happy to see inflation slowing down,” he added. But he noted, “I’d like to see a period of sustained inflation under control, and until we do that I think we just need to move rates further into restrictive territory.”
Consumer prices were flat in July, according to the Bureau of Labor Statistics, while producer prices fell 0.5%.
However, this was just one month’s worth of data: the consumer price index was still up 8.5% year-on-year and the producer price index was up 9.8%. Both numbers are still well above the Fed’s long-term inflation target of 2%, so Barkin said the central bank needs to keep moving forward until it hits its target.
“They want inflation to match our target, which is 2% at PCE, and I want it to match our target over a period of time,” he said. The Fed uses the personal consumption expenditure price index as its preferred measure; June headline PCE was at an annualized rate of 6.8%, while core excluding food and energy was 4.8%.
Barkin’s comments echo those of most Fed officials who have spoken on interest rates recently.
The central bank raised its benchmark interest rate by 0.75 percentage points at each of its last two meetings. Markets are divided on whether the Fed will rise three-quarters of a point in September or drop to half a point, with traders slightly skewed towards the latter, according to Friday morning data from CME Group.
Whatever the case, Barkin said it’s important to act aggressively now. He said his constituents were deeply concerned about inflation and called for action from the Fed.
“Consumers really don’t like inflation, and one message I get loud and clear as I walk around my district is, ‘We don’t like inflation,'” he said.
https://www.cnbc.com/2022/08/12/feds-barkin-says-rate-increases-need-to-continue-until-inflation-holds-at-2percent.html Fed’s Barkin says rate hikes must continue until inflation stays at 2%