Barkin: Fed's Path to Meeting Inflation Target Uncertain

Richmond Fed President Tom Barkin said on Thursday that it's still unclear if the US Federal Reserve will need to raise interest rates to meet its 2% inflation target. In remarks prepared for delivery to the Greenville Chamber of Commerce, Barkin noted that some factors driving current high inflation are expected to ease, including higher tariffs and oil prices.

Barkin stated that 'the inflation mystery is not whether inflation will come back to our 2% target or not.' The Federal Open Market Committee has made clear its commitment to achieving this target. However, Barkin emphasized that the question remains how it gets there, whether the Fed needs to raise rates or if inflation is already on a downward path.

He pointed out that 'much of today's elevated inflation level has come from shocks,' which are expected to pass. With current interest rates considered restrictive enough to bring down inflation, Barkin suggested that no rate hike may be necessary. However, he also noted concerns about embedded inflation and ongoing supply chain problems.

Investors expect the Fed to keep rates steady at the upcoming September policy meeting but potentially hike them in October or December following a recent weak jobs report and largely expected inflation data.