Richmond Fed’s Barkin sees rates rising, based on data

Data will determine if and how high the Federal Open Market Committee will raise rates, according to Federal Reserve Bank of Richmond President Tom Barkin.

“So now I imagine you're wondering, is the FOMC going to keep raising rates?,” Barkin asked rhetorically in a speech delivered in Roanoke, Va., according to text posted by the Fed. “And if yes, how far and how fast? I'm not going to tell you — and in fact, we don't know yet, because it will depend on incoming data.”

Federal Reserve Bank of Richmond President Tom Barkin

Barkin said although rates have risen, they are yet to reach “normal levels,” and with low unemployment and inflation near the Fed’s target, rates should be moved up to long-term levels.

“In addition, we don't want to risk the credibility of our commitment to low and stable inflation,” he said.

“How high rates will ultimately need to rise depends on economic growth: The higher the underlying growth prospects, the higher the policy rate,” he said.

Barkin said he’s “concerned about monetary and fiscal policymakers’ capabilities to provide an effective backstop in the next recession.” Stronger economic growth could offset this, he said, but “Creating growth is easier said than done, of course, and I won’t presume to have all the answers.”

To promote growth, he said, keys include education and workforce development, with rural and inner-cities offering opportunity.

Inflation hasn’t run rampant, in part, because companies remain unsure whether they can pass on rising costs to consumers because of competition from big-box retailers, internet sellers and imports, he said. Another factor keeping inflation in check is that people believe the Fed is going to keep inflation in check, Barkin said. “Inflation expectations play a large role in determining future inflation,” and expectations are in line with the Fed’s 2% target, he said.

Barkin is a voter on the FOMC this year.

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Monetary policy Federal Reserve Federal Reserve Bank of Richmond FOMC
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