Richmond Fed Pres Barkin: Inflation remains a focus for the Fed

<p>Fed's Barkin (2024 voter) emphasizes that inflation remains the primary concern for the Federal Reserve</p><ul><li>Says they are now looking to balance this focus with other aspects of the Fed's mandate, considering the progress made in reducing inflation.</li><li>Clarifies that the Fed's forecasts are not meant to be taken as guidance but are simply projections.</li><li>Downplays the optimistic Q3 GDP data, noting that his ground-level contacts do not reflect this level of growth.</li><li>Observations indicate that demand, employment, and inflation are stabilizing and not as excessively high as Q3 data suggested.</li><li>Remarks on the significant decrease in inflation and anticipates further cooling.</li><li>Notes that demand is normalizing but not dramatically declining.</li><li>The Fed is seeking strong evidence that inflation is returning to its target and notes signs of weakening in certain areas of the consumer economy.</li><li>Regarding potential rate cuts, Barkin states that if inflation decreases as anticipated, the Fed would respond appropriately.</li><li>Believes inflation is proving to be more persistent than most Fed officials think.</li><li>Feels that the Federal Reserve is well-positioned given the current economic outlook.</li><li>When asked about financial market conditions, he comments that the markets will behave independently.</li></ul><p>Yesterday in an interview with WSJ Timiraos spoke toward cuts in 2024</p><ul><li>Interest Rate Cuts Possible in 2024: San Francisco Fed President Mary Daly suggests that the Federal Reserve might need to consider lowering interest rates in 2024 due to the improvement in inflation this year.</li><li>Alignment with Fed's Median Projections: Daly's outlook on interest rates and inflation closely aligns with the median of projections from 19 Fed officials, who anticipate at least three rate cuts next year amid a faster-than-expected decline in inflation.</li><li>Acknowledging Inflation Progress: Daly acknowledges the progress made in controlling inflation, stating that even with potential rate cuts, the Fed's benchmark interest rate would remain restrictive.</li><li>Labor Market Concerns: Daly is closely monitoring the impact of restrictive policies on the labor market, emphasizing the need to balance price stability with job preservation.</li><li>Fed's Dual Mandate: Daly highlighted the importance of focusing on both aspects of the Fed's mandate: controlling inflation and minimizing labor market disruptions.</li></ul><p>Since the Fed rate decision last week, officials have dialed back a bit on the rate expectations without not acknowledging the gains they have made. Perhaps, they are concerned about the sharp decline in rates which is a stimulus along with the failure stock prices which are also a stimulus. Both are threats to inflation, and officials are probably concerned about reigniting the inflation expectations.</p>

This article was written by Greg Michalowski at www.forexlive.com.