Federal Reserve (Fed) Bank of Richmond President Tom Barkin spoke on Wednesday about the Fed's recent moves on rates, and cautioned that the fight on inflation may not be over as risks remain.
Key highlights
50 BPS rate cut in September was warranted because rates were 'out of sync’ with decline in inflation and the unemployment rate near its sustainable level.
The Fed can't declare inflation battle over. I expect little further drop in Core PCE Price Index until next year.
50 BPS of cuts shown as the median Fed policymaker projection for the rest of this year would also take a little bit of the edge off rates.
I am watching closely how lower interest rates influence home and auto sales to see if demand risks outrunning supply.
Recent labor action and geopolitical conflict are also among inflation risks.
Whilst low-hiring, low-firing labor market could persist, demand for workers could also move higher if demand expands.
The pace and extent of rate-reduction cycle requires Fed to be attentive to how economy and inflation develop.
Fed rate cuts are to recalibrate to a less restrictive position.
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