Fed's Barkin: Higher rates may create risk of more significant slowdown

Eren Sengezer FXStreet

Thomas Barkin, president of the Federal Reserve Bank of Richmond, acknowledged on Friday that raising rates further could create the risk of a more significant slowdown in the economy, per Reuters. "The ’70s provides a clear lesson: If you back off inflation too soon, inflation comes back stronger, requiring the Fed to do even more, with even more damage," Barkin further elaborated.

Key takeaways

"Comfortable doing more on interest rates if coming data doesn't confirm a story that slowing demand is returning inflation to the 2% target."

"2% target has served the Fed well for a generation."

"Inflation has proved stubbornly persistent, still looking to be convinced that weakening demand will control it."

"A question whether inflation can settle while higher-income consumers continue spending and the labor market remains robust."

Market reaction

The US Dollar Index clings to small recovery gains at 102.20 after these comments.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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