Richmond Fed President Thomas Barkin expressed his comfort with Fed’s current approach to interest rate hikes, stating, “I’m comfortable with the trajectory we’re on now, meeting by meeting, whether you need a 25 basis point hike or not.” He acknowledged the challenges of finding the right balance, but emphasized that even if the decision isn’t perfect, it won’t be too far off.
Barkin also addressed the uncertainties surrounding the ongoing banking situation and its potential impact on consumer confidence, business investment, and the availability of credit. “There is a lot of uncertainty about what if anything this bank situation does to consumer confidence, business confidence, business investment, consumer spending, availability of credit,” he said, adding that it’s difficult to predict the future effects on demand and inflation.
Despite the uncertainties, Barkin highlighted the wide range of possible outcomes and Fed’s ability to respond accordingly. “If inflation persists, we can react by raising rates further,” he said. “If I am wrong about the pricing dynamics at play, or about credit conditions, then we can respond appropriately.”