Richmond Fed's Barkin Says Inflation Still Too High, Backs Keeping Policy Restrictive

Thomas Barkin, president of the Federal Reserve Bank of Richmond, said inflation remains well above target and monetary policy should stay restrictive for now.

Speaking at an event in Aspen, Colorado, on June 28, Barkin said "price growth is still too high" and that it is difficult to be confident inflation will return to the Fed's 2% target unless additional disinflationary forces emerge from areas such as the federal funds rate or the labor market, Bloomberg reported.

The personal consumption expenditures price index released by the Commerce Department on June 26 rose 4.1% in May from a year earlier, the highest reading since April 2023.

Barkin said the recent ceasefire between the US and Iran, which has helped quickly stabilize oil and gasoline prices, was a positive development. Still, he said other inflationary pressures remain, including increased investment in artificial intelligence infrastructure.

He said policymakers should watch how the economy evolves over the next few months before deciding the direction of monetary policy.

Barkin also expressed concern that companies are still using today's high inflation as a reference point when setting prices.

"Businesses reflect the current price level when setting prices, so inflation tends to persist," Barkin said. "For that reason, I think it is appropriate to maintain a somewhat restrictive monetary policy stance like the current one."

He added that while companies are facing higher costs, consumer resistance to price increases remains strong, limiting their ability to pass through all of those costs.