In a recent speech on Wednesday, Richmond Fed President Tom Barkin reiterated the need for prudence on the path of interest rates and that rises are still a possibility if inflation picks back up.
Barkin stated at his lecture in Raleigh, North Carolina, that “a soft landing is increasingly conceivable but in no way inevitable.”
He listed many potential threats to that “soft landing,” which is a scenario in which the US economy slows down without going into recession and inflation declines.
One such danger is that the recent decline in long-term rates may increase demand in interest-sensitive industries, such as the property market, and so drive inflation higher. He said that the housing and services components of inflation are still rather significant.
Over the last month, a number of Federal Reserve officials have used conversations with the media to cast doubt on the timing and reality of the planned reduction. In an interview with Yahoo Finance at the end of the previous year, Barkin stated that before thinking about reducing rates, he needed to see greater consistency and confidence that inflation was declining.
Barkin urged Fed observers to concentrate on inflation’s advancement rather than the Fed’s projected pace of change in his last statement on Wednesday.
“Is inflation continuing its descent and is the broader economy continuing to fly smoothly?” Said Barkin. “Conviction on both questions will determine the pace and timing of any changes in rates.”