By David Lawder
WASHINGTON, Jan 13 (Reuters) – Richmond Federal Reserve President Tom Barkin on Tuesday called December’s inflation data “encouraging,” though he noted inflation often spikes at the start of the year and said he hopes it will come in at modest levels for the next couple of months.
“It is, I think, a delicate balance right now,” Barkin told the CFA Society in Washington, noting that inflation is higher than target but does not seem to be accelerating, and unemployment is not ticking out of control.
“Nobody wants inflation expectations to get embedded and nobody wants the labor market to deteriorate further,” Barkin said. “And it’s possible that neither one will happen.”
The Fed cut the policy rate by 75 basis points last year and signaled in December that it may pause in the new year to assess what the economy needs.
Government data released Tuesday showed consumer prices rose 2.7% in December from a year earlier. That was “encouraging” because it did not rebound as some had expected, Barkin said.
The Fed targets 2% by a different inflation measure that will be calculated after further data including producer prices is released in coming days.
Last week the Labor Department’s monthly jobs report showed the December unemployment rate was 4.4%, down a tick from the previous official readout but up from a year earlier.
Barkin did not suggest those developments merited an urgent response from the Fed.
“Most of our rate moves have impact 12 months later, and so you have some time to think through these things when you’re not sure which way to go,” he said. “No one meeting actually matters that much, right? You can get it wrong, and, you know, the next meeting you can fix it.”
He declined to comment on “stuff that’s been in the news,” a reference to the U.S. Justice Department’s threat of indictment against Fed Chair Jerome Powell. The Fed chief has blasted the move as intimidation from President Donald Trump’s administration aimed at pressuring the central bank to lower rates.
Barkin said countries that “have independent central banks have better economic outcomes.”
(Reporting by David Lawder; Editing by Chris Reese and David Gregorio)
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