![Richmond Fed President Tom Barkin: Disconnect between consumer data and what I'm hearing on the ground](https://image.cnbcfm.com/api/v1/image/107340618-17012707391701270736-32234923016-1080pnbcnews.jpg?v=1701270739&w=750&h=422&vtcrop=y)
Richmond Federal Reserve President Thomas Barkin said Wednesday that policymakers should keep the option to raise interest rates if inflation does not show sufficient progress downward.
Markets largely expect the Fed to stop raising rates and begin cutting in 2024. But Barkin said he’s not ready to commit to a particular policy path with so much uncertainty in the air.
“If inflation comes down naturally and smoothly, wonderful, you know, there’s no need to do anything with interest rates if inflation comes down,” he told CNBC’s Steve Liesman during an interview at the CNBC CFO Council Summit.
“But if inflation flares up again, I think you want to have the ability to do more on rates,” Barkin added. “I guess the biggest point is that there’s no precision that anybody can point to exactly what the level of rates is that properly addresses inflation and exactly how you want to address it. So you’re constantly trying to adjust on the flight while you. learn more about the economy.”
Barkin spoke shortly after the Commerce Department reported that the economy grew at a 5.2% annual rate in the third quarter. As growth has held strong, inflation is still above the Fed’s annual target of 2%, although it has shown consistent progress lower in recent months. The Fed’s preferred inflation measure of core personal consumption expenditures showed a 12-month rate of 3.7% in September and is expected to show a slightly lower reading in October.
Prices in futures markets indicate that the Fed could cut rates as much as four times, or a full percentage point, next year. Fed Governor Christopher Waller said Tuesday that he would consider cuts if inflation data shows progress over the coming months.
However, Barkin called the possibility of easing policy “a prognostic question” that he is not ready to answer.
“I don’t see it as a right answer on rates or a wrong answer on rates,” he said, adding that he is “skeptical” about inflation and thinks it will be “stubborn” going forward.
Atlanta Fed President Raphael Bostic also offered a comment Wednesday, saying in an essay that he sees economic growth slowing and believes inflation will also come down further.
“Overall, the research, data, survey results and input from business contacts tell me that tighter monetary policy and tighter financial conditions more broadly are biting harder into economic activity,” Bostic wrote. “At the same time, I don’t think we’ve seen the full effects of restrictive policy, another reason I think we’ll see a further cooling of economic activity and inflation.”
Bostic said his staff expects the inflation rate to decline to 2.5% by the end of 2024 and then return to the Fed’s 2% target by the end of 2025.
Both Bostic and Barkin will be voters in 2024 on the Federal Open Market Committee’s tax bill.
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