Fed’s Barkin backs rate hike, stays unsure on more increases

Richmond Fed President Thomas Barkin said on Tuesday that the Federal Open Market Committee (FOMC) decided to raise interest rates last Wednesday because risks to inflation outweighed those to maximum employment.

Barkin, who is speaking in Baltimore at a CFA event, said, “Last week's rate hike will help restore price stability, we'll see if more hikes are needed,” and remains unsure about further tightening needed by the Fed to tackle inflationary pressures.

Key highlights:

We raised rates last week because risks to inflation outweigh risks to maximum employment

Last week's rate hike will help restore price stability, we'll see if more hikes are needed

It is tempting to blame high inflation on a handful of categories exposed to energy costs or tariffs, but much of the personal consumption expenditures index is rising by more than 3%

Economic conditions are, if anything, firming

There is momentum outside data centers and AI, with consumer spending holding up and strength in defense and manufacturing

Passing shocks like tariffs and energy are not fading, there is a risk that high inflation today will impact future inflation

The labor market is not overheated or even particularly tight

Don't see much evidence that consumer balance sheets are stretched

Consumers will spend as long as the job market remains healthy