Federal Reserve Bank of Richmond President Thomas Barkin poses during a break at a Dallas Fed technology conference in Dallas, Texas, U.S. May 23, 2019. REUTERS/Ann Saphir/File Photo
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Aug 12 (Reuters) – Richmond Federal Reserve Bank President Thomas Barkin said on Friday he wants to raise interest rates further to bring inflation under control and will be monitoring US economic data to decide how much a rate hike should be at the next Fed meeting in September.
“I’d like to see a period of sustained inflation under control, and until we do that I think we need to move rates into restrictive territory,” Barkin told CNBC.
While this week’s data showing inflation didn’t accelerate in July was “welcome,” Barkin said he would like inflation to run at the Fed’s 2% target for “some time” before it stop raising interest rates.
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“More has to come to enter restrictive territory,” he said.
The Fed has raised interest rates sharply in recent months, including two consecutive 75 basis point hikes in June and July that brought the Fed’s target range to 2.25%-2.5%. Investors currently expect the Fed to backtrack to a half-point cut at next month’s meeting, though bets in interest rate futures markets reflect a roughly 45% chance of a third straight 75 basis point move.
Noting that there would be more data on inflation and employment by then, Barkin said he would “make a decision as we get closer” and would like to see “real” borrowing costs — that is, the cost of money after measures for inflation and Inflation expectations – hovering above zero.
A University of Michigan survey released on Friday showed that year-on-year inflation expectations fell to a six-month low of 5.0% from 5.2%, while the survey’s five-year inflation outlook rose to 3.0% from 2.9% .0% have increased.
“I think we’re on the verge of moving real rates across the curve into positive territory, we need to keep them there,” Barkin said. “And we have to meet some of the expectations that there are for the rate path to keep it there.”
So far, the economy is weathering the Fed’s rate hikes well and is fundamentally healthy, he said, adding that the unemployment rate is likely to rise as monetary policy tightens.
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Reporting by Ann Saphir; Adaptation by Mark Porter and Toby Chopra
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