Fed’s Barkin: Central bank ‘nicely positioned’ amid inflation retreat

Federal Reserve Bank of Richmond President Thomas Barkin poses during a break at a Dallas Fed conference on technology in Dallas, Texas, U.S., May 23, 2019. REUTERS/Ann Saphir/File Photo

Federal Reserve Bank of Richmond President Thomas Barkin on Tuesday welcomed the retreat in inflation but refrained from saying how that affects his outlook for central bank interest rate policy next year, in an interview with Yahoo Finance.

“I think we’re nicely positioned now with a 3-percent inflation rate moving down, and a 3.7-percent unemployment rate staying relatively steady,” and whether the Fed can deliver on forecasts of rate cuts revealed at last week’s policy meeting depends on how the economy performs, Barkin said.

The official spoke in the wake of last week’s Federal Open Market Committee meeting that saw policy makers hold rates steady at between 5.25 percent and 5.5 percent and pencil in three rate cuts in 2024, amid expectations that the inflation pressures that drove aggressive rate hikes will continue to abate.

READ: With rate hikes likely done, Fed turns to timing of cuts

The prospect of easier monetary policy has sparked a rally in financial markets, even as a number of Fed officials, including New York Fed chief John Williams, have tried to push back on the idea rate cuts are assured.

Barkin, who will have a vote on the rate-setting Federal Open Market Committee next year, declined to say he was on board with rate cuts, but hinted he was open to them if the economy performs as expected.

“We’re making good progress on inflation,” Barkin said, adding “I think that just makes the case to balance the perspective between both sides of our mandate, inflation and employment.”

READ: US consumer inflation lifted by rising rent costs in November

Barkin cautioned the Fed forecasts are no more than that and are not a promise for action.

“We’re not yet done with inflation. I’m hopeful the numbers will come down over the coming months,” Barkin said. “If you’re going to assume that inflation comes down nicely, then of course we’d respond appropriately,” he said, adding “I don’t assume what the data is going to do. We’ll see what happens.”

Barkin said that in terms of investor expectations of rate cuts, “one of the things I’ve learned is I don’t control markets and so they’re going to do what they’re going to do.”