Fed's Barkin thinks the U.S. economy will slow further, cooling down inflation

By Greg Robb

Recent data whiplash only confirms the wisdom of being slow to move interest rates, Richmond Fed president says

The U.S. economy should slow in coming months - a development that will help cool inflation, Richmond Fed President Tom Barkin said Monday.

"I am optimistic that today's restrictive level of rates can take the edge off demand in order to bring inflation back to our target," Barkin said in a speech to the Columbia Rotary Club in South Carolina.

If the economy slows more significantly, the Federal Reserve has enough "firepower" to support it, Barkin noted.

The Richmond Fed president added that he doesn't think the economy is overheating, and that the recent volatility in U.S. economic data justifies the Fed's go-slow approach on interest rates.

The Fed has held its benchmark policy rate steady at 5.25% to 5.5% since last July.

Barkin said that early-2024 inflation data has been "disappointing to those who thought the inflation fight was behind us."

He said it is too soon to know if the inflation and other economic data seen since the beginning of the year is "a real shift" in the economic outlook, or "merely one of the bumps we said we expected along the way."

Interest rates have declined a bit since the Fed's decision to hold rates steady last week and Federal Reserve Chair Jerome Powell's subsequent press conference. The yield on the 10-year Treasury note BX:TMUBMUSD10Y had dropped to 4.499% in Monday's trading.

-Greg Robb

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05-06-24 1308ET

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