by Howard Schneider

WASHINGTON (Reuters) – Richmond Federal Reserve Chairman Thomas Barkin said on Friday he was not averse to further interest rate hikes if forthcoming data did not show that falling demand for goods and of services translates into a slowdown in inflation.

“I am still trying to be convinced of the plausibility of the hypothesis that the slowdown in demand will bring inflation relatively quickly towards the 2% target,” he said in a speech for a intervention at an event organized by the NGO Maryland Government Finance Officer Association.

“If future data does not confirm this scenario, I will not hesitate to do more,” he added.

The US Federal Reserve (Fed) left key rates unchanged at 5%-5.25% on Wednesday, but its new projections show rates could rise by at least another half a point by the end of the month. year.

Many investors are therefore preparing for a resumption of rate hikes at the July Fed meeting.

Without commenting on this deadline, Thomas Barkin stressed that the objective of the American bank remained to bring inflation, which he considers “stubbornly persistent”, to 2% while its current rate is more than twice as high. to this target.

He also admitted that another rate hike “creates the risk of a bigger downturn” but that pulling back too soon would potentially cause even bigger problems.

“The lesson of the 1970s is clear: if you backtrack on inflation too soon, it comes back stronger, forcing the Fed to do even more, with even more damage,” he explained. “It’s not a risk I want to take,” he added.

According to Thomas Barkin, demand in the United States is “weakening”, but “consider it weaker but not weak yet”, he said.

He added that the question of whether inflation could fall while the labor market remains “robust” and consumers with high incomes “continue to spend” was unresolved.

Christopher Waller, one of the governors of the Fed, also displayed a “hawkish” tone on Friday after the central bank’s announcements.

“Underlying inflation is not falling as I thought it would,” he told an economics conference in Norway.

“Inflation is just not budging and it will likely require further tightening to try to bring it down,” he added.

(Report Howard Schneider; Claude Chendjou, edited by Blandine Hénault)

Copyright © 2023 Thomson Reuters