Federal Reserve Bank of Richmond President Thomas Barkin said the central bank may need to raise interest rates to a higher level than previously anticipated should inflation keep running too fast for comfort.
“Inflation is normalizing but it’s coming down slowly,” Barkin said Tuesday in a Bloomberg TV interview with Michael McKee.
“We may or may not choose to take rates up further if inflation continues to persist but we’ll have to see what happens,” he said. If inflation settles down, borrowing costs may not need to rise so high, but “if inflation persists at levels well above our target, maybe we’ll have to do more.”
Barkin spoke shortly after data showed consumer prices climbed 6.4% in January from a year earlier, still far above the Fed’s goal for 2% annual inflation, which is based on a separate measure. The overall consumer price index climbed 0.5% from the prior month, bolstered by gasoline and shelter costs.
The Fed increased its policy rate by 25 basis points on Feb. 1 to a range of 4.5% to 4.75% and promised ongoing rate hikes to counter high inflation. Traders on Tuesday were pricing in quarter-point increases at the March and May policy meetings, and near-even odds of another one in June. Fed officials will update their forecasts at the next meeting, which takes place March 21-22.
Barkin doesn’t have a vote on interest rates this year. He noted that additional inflation reports are due before the March gathering and will weigh on his forecasts.
Investors have lifted where they see rates peaking this year and are now broadly in line with policy makers’ projection of 5.1% following stronger-than-expected jobs reports and continued signs of persistently high prices.
