Richmond Federal Reserve President Thomas Barkin said on the 22nd that the U.S. economy is "gaining momentum" and that the Federal Reserve should continue to focus on inflation. In prepared remarks for a speech to the CFA Society Baltimore chapter, Barkin explained that "the risk of inflation exceeds the risk of maximum employment. That is why we raised rates at last week's meeting," and expressed the view that a 25 basis point rate hike would "help" return inflation to the Fed's 2% target. He added that "we will continue to assess in the future whether additional rate hikes are needed, and how many may be required." Barkin noted that companies' inflation outlook for next year will be an important factor as they consider next year's budgets and pricing strategies, and expressed the view that the Fed's rate hikes and expectations of further increases could restrain businesses' inflation expectations and ease upward pressure on prices. He also said that many components of the personal consumption expenditures price index are rising at a pace exceeding 3% year on year, that he senses momentum in areas beyond data centers, that the defense sector is booming, and that optimistic voices are being heard from manufacturing and banking contacts. Barkin does not hold a vote on this year's Federal Open Market Committee.
Barkin says the Fed raised rates last week and further hikes depend on inflation expectations, signaling a higher policy rate path.
Hawkish Fed commentary on continued rate hikes and persistent inflation pushes the 10-year Treasury yield higher.
