CPI data show inflation progress toward 2% goal, says Fed's Barkin

CPI data show inflation progress toward 2% goal, says Fed's Barkin
Figures from December show core inflation tamer than expected, but "there's still work to do" amid broader uncertainty.
JAN 15, 2025
By  Bloomberg

Federal Reserve Bank of Richmond President Tom Barkin said fresh data show continued progress on lowering inflation toward the central bank’s 2% goal, but that interest rates should remain restrictive.

New consumer-price data “continues the story we’ve been on, which is that inflation is coming down toward target,” Barkin told reporters following an event in Annapolis, Maryland. “But there’s still work to do.”

Barkin’s comments follow figures released earlier Wednesday that showed the so-called core consumer price index, which excludes food and energy costs, increased a less-than-forecast 0.2% in December. That came after a 0.3% rise for four straight months.

The Fed lowered its benchmark interest rate at three consecutive meetings beginning in September, including by a quarter point at its most recent gathering in December. Barkin is among Fed officials, including Chair Jerome Powell, who have signaled they’d prefer a more gradual pace of cuts this year as the central bank looks for more progress on lowering inflation.

“I do still think we need to be restrictive to seal the final mile, if you want to put it that way, back to 2%,” Barkin said. 

Still, Barkin said there is a great deal of uncertainty in the economic outlook that makes it difficult to estimate how Fed policy will play out. He said it was too soon to forecast how President-elect Donald Trump’s economic plans might impact the Fed’s moves, given that many of the proposals are yet to be finalized. 

On the labor market, Barkin said he was encouraged by figures released earlier this month. That data showed US hiring ended 2024 on a high note and unemployment edged lower. 

Fed officials anticipate two interest-rate reductions this year, according to the median estimate released last month. Investors widely expect officials to hold interest rates steady at their Jan. 28-29 meeting, according to futures markets. 

Barkin, who does not vote on Fed interest-rate decisions this year, made the comments after delivering remarks similar to a speech he gave at a separate event on Jan. 3.

Treasury Yields

Meanwhile, Barkin said a recent rise in long-term Treasury yields need not affect the Fed’s policy calculations.

Barkin said he didn’t think the run-up in yields reflects changing expectations of the Fed’s short-term policy path or a rise in inflation expectations across the economy, but rather supply and demand conditions in the Treasury market. 

“I haven’t seen anything in the rates to date that makes me think our policy path needs to get affected by these levels of rates,” he said. 

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