Federal Reserve Bank of Richmond President Tom Barkin said on Friday that the Fed is aiming to bring inflation down to its 2% target and expressed confidence it will manage to do so but stressed he is “doubtful the process will be quick.” “The Fed is the organization charged with fighting inflation, and we have made our resolve clear,” Barkin stated at the 2023 SIEPR Annual Economic Summit at Stanford. “If you back off on inflation too soon, it comes back stronger, requiring the Fed to do even more, with even more damage. I’d like to avoid that,” he added. The central banker pointed out that inflation has likely passed its peak but warned the Fed still has “work to do,” adding more rate hikes are likely and rate cuts are not expected this year.
Fed expects more monetary policy tightening
United States Federal Reserve expects “ongoing increases” in the federal funds rate and a “period of below-trend growth” as it continues its efforts to knock inflation down to 2%, the Fed’s Board of Governors stated in its latest Monetary Policy Report on Friday. Inflation in the services sector, excluding housing, “remains elevated, and prospects for slowing inflation may depend in part on an easing of tight labor market conditions,” the board underlined. Fed governors noted that recent data suggest that “high inflation is not becoming entrenched,” but added that the jobs market is still “extremely tight” due to a “significant labor supply shortfall.” “Financial conditions have tightened further” since the previous report in June 2022, and rate hikes have “weighed on financing activity,” according to the Fed. “Real gross domestic product (GDP) growth picked up in the second half of 2022, although the underlying momentum in the economy likely remains subdued,” the board also wrote.