– Keep Monetary Policy ‘Modestly Restrictive’ Til Confident Inflation Headed to 2%
By Steven K. Beckner
(MaceNews) – Richmond Federal Reserve Bank President Thomas Barkin warned Tuesday against a premature resumption of interest rate reductions in the current climate of continued excessive inflation and great uncertainty.
Barkin said he favors keeping monetary policy “modestly restrictive” until he and his Fed colleagues become “more confident” that inflation is on its way down to the Fed’s 2% target.
Besides, he said, it is hard for the central bank to make policy changes “amid such uncertainty” about how the policies of the new Trump administration will affect the economy.
He said he prefers to “wait and see” how the economy unfolds.
Late Monday, Chicago Fed President Austan Goolsbee, a 2025 FOMC voter, echoed the cautious approach many of his colleagues have taken, even though he has been more willing than most to cut rates and has lately downplayed inflation risks.
Earlier in London, Dallas Federal Reserve Bank President Lorie Logan avoided comments on the economic outlook and monetary policy, instead focusing on “effective” and “efficient” management of the Fed’s shrinking but still enormous balance sheet.
Echoing their Chairman Jerome Powell, an array of Fed officials have let it be known lately that they’re in “no hurry” to cut rates ever since the Fed’s rate-setting Federal Open Market Committee left the key federal funds rate unchanged in a target range of 4.25% to 4.5% on Jan. 29, having previously cut it by 100 basis points at the September, November and December meetings.
Minutes of the meeting released Wednesday revealed that “participants observed that the Committee was well positioned to take time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance.”
Many officials have echoed that sentiment since the meeting, as did Barkin in remarks to the Rotary Club of Richmond.
“Labor market conditions remain solid, while inflation remains somewhat elevated,” he said. “ It makes sense to stay modestly restrictive until we are more confident inflation is returning to our 2 percent target.”
Barkin said “it is critical that we remain steadfast” in the battle against inflation, noting that “we learned in the ’70s that if you back off inflation too soon, you can allow it to reemerge.”