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Federal Reserve Voting Committee: The current interest rate level is sufficient and the impact of raising interest rates has not yet been fully felt

2024-05-07

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On Monday (May 6) local time, Richmond Fed President Barkin said that the Fed's current interest rate level should be enough to cool the economy and bring inflation back to the 2% target level, while the strong performance of the job market gives officials Time to wait.

The Federal Reserve continued to stay on hold at last week's interest rate meeting, maintaining the federal funds rate target range at 5.25% to 5.50%, which is the highest interest rate level in 20 years. Policymakers have kept interest rates unchanged six times since last July.

As the resilience of the U.S. economy and the stubbornness of inflation have exceeded expectations, market bets on the number of interest rate cuts by the Federal Reserve this year have been continuously suppressed. Some pessimists have begun to doubt that there may be no interest rate cuts this year, and do not even rule out the possibility of continuing to raise interest rates.

At the press conference after the interest rate meeting, Federal Reserve Chairman Powell said that further interest rate increases were unlikely, which was interpreted by the market as a dovish signal, but he did not disclose when the interest rate cuts might begin.

Barkin, who has a vote on monetary policy this year, spoke Monday at the Rotary Club of Columbia, South Carolina.

Barkin: Current interest rates are enough

U.S. inflation data for the first three months of this year have dashed market hopes that the Federal Reserve will cut interest rates soon, and some Fed officials have recently said that current interest rate levels may not be as restrictive as previously expected.

However, Barkin said in his speech: "I am optimistic that the current restrictive interest rate level can suppress demand and thereby bring inflation back to our target level. The impact of raising interest rates has not yet been fully felt." The Fed set the 2% setting It is a long-term inflation rate target and tends to use the core PCE (Personal Consumption Expenditures Price Index) as the inflation measure.

He said that despite disappointing inflation data so far this year, he does not think the U.S. economy is overheating. Previously released data showed that the U.S. core PCE rose 2.8% year-on-year in March, higher than expected. Prices rose at an annualized rate of 3% in the six months to March, up from 1.9% in the six months to December, reflecting signs of a rebound in inflation.

Barkin said the challenge for recent inflation data is whether policymakers should take more signals from the past three months or the first seven months, when the economy appeared to be moving steadily toward the Fed's inflation target.

He said the fluctuations in the data suggested that policymakers still needed to wait to determine whether inflation would resume a steady decline.

Barkin added: "The economy is moving in a more balanced direction, but no one wants inflation to pick up again. We have said that we want to be more confident that inflation is heading towards the 2% target. Given the strength of the labor market, We have time to gain that confidence."

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Federal Reserve Voting Committee: The current interest rate level is sufficient and the impact of raising interest rates has not yet been fully felt

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