Barkin: Inflation "Encouraging," But Fed Not In a Rush
Richmond Federal Reserve President Tom Barkin described December's US inflation data as "encouraging." However, he cautioned that inflation often tends to rise at the beginning of the year, so the next few months will still need to be closely monitored.
Barkin described the current situation as walking a "fine line." Inflation is still above target, but it doesn't appear to be accelerating, while unemployment hasn't spiked dramatically either. He said the Fed's challenge is to maintain two things at once: inflation doesn't flare up again and the labor market doesn't weaken.
He emphasized that no one wants inflation expectations to "stick" in the public. At the same time, no one wants employment conditions to become more fragile. Barkin said there's still a good chance both can be kept from worsening.
Last year, the Fed cut interest rates by a total of 75 basis points, and in December signaled a pause at the start of this year to assess the economy's true needs. This means the Fed doesn't want to make major decisions based on just one or two pieces of data.
The latest government data showed consumer inflation at 2.7% (YoY) in December. Barkin called this "encouraging" because inflation did not rebound as some markets had feared.
However, the Fed is targeting 2% inflation based on other measures, which will only be calculated after further data is released, including the Producer Price Index (PPI) in the coming days. Barkin also assessed that labor market conditions remain relatively manageable, with December unemployment at 4.4%.
Barkin does not see this situation as requiring an emergency response from the Fed. He emphasized that the impact of interest rate changes is usually felt about 12 months later, so there is still time to reflect and adjust policy. He also declined to comment on the current issue (regarding Powell), but emphasized one important point: countries with independent central banks typically have better economic outcomes.
5 Key Points:
- Barkin called December inflation "encouraging," but said the beginning of the year is often prone to spikes.
- Inflation remains above target, but is not accelerating, and unemployment is also under control.
- The Fed already cut rates by 75 basis points last year and is likely pausing for evaluation.
- December headline inflation was 2.7% YoY; the Fed's 2% target uses other measures, awaiting further data (including the PPI).
- Barkin: Monetary policy has long-lasting impacts, so there's no need to rush; central bank independence is important. (Asd)
Source: Newsmaker.id
