Barkin Says The Fed May Need A Final Rate Above 5% To Cut Inflation


(Bloomberg) — Federal Reserve Bank of Richmond president Thomas Barkin said a strong labor market and persistent inflation mean the central bank may need to raise interest rates above 5%, although this could slow the pace of hikes.

“The market remains tight and that means there is still more work to be done,” Barkin said in an interview on CNBC Television Friday, citing the job numbers released earlier in the morning. “We have to do what we have to do with the rates to get inflation back on target, so I’ll start with inflation.”

While Barkin said it’s “completely conceivable” for the Fed to top 5%, that’s not the current plan, adding that he expects “a slower rate of rate hikes, a longer rate of rate hikes and possibly a higher end point.”

Barkin spoke shortly after labor data showed that the workforce is strong but moderating, indicating that demand for workers remains robust despite the Fed’s push to raise interest rates to cool inflation, which has been high for nearly 40 years.

Read more: Top US jobs forecasts, unemployment rises in mixed picture for Fed

Central bank officials have repeatedly stressed that in order to meet their inflation target, they need to bring more balance to labor supply and demand. Fed Chair Jerome Powell said after the central bank raised interest rates by another 75 basis points on Wednesday, labor market conditions have not softened in an “obvious” way.

Read more: Fed’s Collins says premature to assess how high rates should go

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