Fed’s Barkin Still Expecting Inflation to ‘Crack’

The Federal Reserve has more work to do to bring inflation back to its 2% target as the latest data on price pressures is not weak enough, Richmond-based Fed Chairman Thomas Barkin said Wednesday. .

His comments came shortly after a key government report showed that US consumer prices barely rose in March as gasoline prices fell, but stubbornly high rents kept underlying inflationary pressures simmering.

“It was more or less as expected“, said Barkin in an interview with CNBC about the report. “I have been particularly focused on core inflation, which remains just above 5% yoy. We had good news on energy, but I think there is still a lot to do to get core inflation back to where we would like”.

At its March meeting, the US central bank raised its benchmark interest rate by 25 basis points to a range of 4.75%-5%, nearing a rate high after almost a year of rapid rises.

He has since signaled a more cautious approach following the recent banking turmoil, which could see banks tighten credit conditions further. Barkin He said that he is closely monitoring this situation, as well as the delayed effect of the previous monetary measures of the fedas they work their way into the economy to curb demand.

Barkin declined to say whether he would support another rate hike at the next meeting of monetary policy of the fed May 2-3, but stressed that while demand is cooling, he is also closely watching employment and inflation data, which remain relatively strong.

“I’m waiting for inflation to crack (…) It’s moving in the right direction (…) but in the absence of a month or two months or three months with inflation at our target it’s hard to argue that we’re heading from convincing way there”, he commented.

Investors are still expecting a further quarter percentage point rate hike at next month’s Fed meeting, but expect the central bank to reverse course by late summer and are now pricing in a few rate cuts by the end of anus.

Source: Reuters