Barkin says Fed cannot count on markets alone to hold inflation down
The Richmond Fed president says he is watching financial conditions closely but wants the current cycle to look like the 1990s mid-cycle adjustment, not a prolonged tightening campaign.
Published
Federal Reserve Bank of Richmond President Thomas Barkin says the central bank is highly attentive to financial conditions but cannot simply assume markets will keep borrowing costs high enough on their own to bring inflation to heel. He said he hopes the current period comes to resemble the 1990s mid-cycle adjustment, when the Fed paused after a short run of hikes rather than continuing to tighten.
The Fed raised its benchmark rate by a quarter point last week, its first increase since 2023. Barkin's remarks come as other officials strike a firmer tone. Boston Fed President Susan Collins has said a somewhat more restrictive policy stance will help bring inflation back to the Fed's 2% target, and that the odds have risen of inflation staying notably above that goal. Collins said persistent inflation and renewed conflict in the Middle East supported her vote for last week's increase.
Fed Vice Chair Musalem has said business contacts are planning price increases near 3%, even after stripping out supply-side pressures, and that the Fed likely needs to raise rates further to bring inflation down. Chicago Fed President Austan Goolsbee has said the Fed's own projections may not be enough if the inflation pressure turns out to be driven by demand, though he has also said a rate hike would not reverse the cuts made in 2025.
Barkin's framing is more dovish than that of Musalem and Goolsbee, both of whom have stressed that further hikes are likely needed and that inflation risks remain acute. His hope for a 1990s-style soft landing, and his acknowledgment that markets alone cannot be relied on to deliver enough restraint, suggests he sees room for the hiking cycle to pause. That view sits apart from the more hawkish tone that has dominated recent Fed communication, at a time when most officials are still pricing in additional tightening.