Fed’s Barkin flags risk of inflation getting stuck

In the remarks overnight, Richmond Fed President Thomas Barkin expressed that he’s still “more concern about inflation” than the labor market. He added due to solid demand and renewed labor market tightness, there are challenges in completing the “last mile” of of the inflation fight.

While Barkin dismissed the notion of a “big resurgence” in inflation, he acknowledged the “very real risk” of inflation “getting stuck”.

He stated that he would be optimistic if, by Q1, inflation continued to show signs of stabilization, which would allow Fed to consider moving back to a “neutral” policy stance.

However, Barkin made it clear that “normalization comes when you’re convinced that inflation hits 2%.” He remains “open-minded” on how quickly rates could fall, leaving room for flexibility depending on future inflation data.