Richmond Fed's Tom Barkin Says Inflation Fight Isn't Over -- WSJ
By WSJ Pro Staff
The Federal Reserve's fight against inflation isn't over even though price-pressure readings have moved in the right direction recently, Federal Reserve Bank of Richmond President Tom Barkin said.
The policy maker said the U.S. central bank must remain vigilant on reducing inflation even as rising interest rates could boost the risk of recession.
"I get a lot of questions about whether the Fed should remain this committed given that risk," Mr. Barkin said at a forum in Durham, N.C., on Friday. "I guess my simple answer is that everyone hates inflation, and we are the ones mandated to address it. The Fed's objective isn't to hurt the economy; it's to reduce inflation."
Inflation has abated in recent months but remains far above the central bank's 2% target. Last month, the U.S. Labor Department said its consumer-price index was up 7.1% in November from a year earlier. That was down from a peak of 9.1% in June. In an effort to bring down inflation, the Fed last year aggressively raised its benchmark interest rate, from a range of 0.25% to 0.5% in March to 4.25% to 4.5% by year's end.
The Fed slowed its pace of monetary policy tightening late in the year, with a 0.5-percentage-point rate increase in December, following four straight 0.75-point increases.
"We moved quickly last year, but what we were doing was taking our foot off the gas," Mr. Barkin said, and now, "with our foot unequivocally on the brake, it makes sense to steer more deliberately as we work to bring inflation down."
"The experience of the '70s showed that if you back off on inflation too soon, it comes back stronger, requiring the Fed to do even more, with even more damage," he said. "If you change the target before it is achieved, as some have recently advocated, you put the Fed's credibility at risk, which in turn increases the sacrifice required in order to control inflation. And if you think supply-chain improvements and our actions to date are enough to bring inflation down quickly, then our more gradual rate path should limit the harm."
(END) Dow Jones Newswires
January 06, 2023 15:36 ET (20:36 GMT)
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