The president of the Richmond Federal Reserve on Thursday said the speed at which the U.S. central bank raises interest rates to head off high U.S. inflation will depend on how quickly price pressures recede.
Thomas Barkin, in a speech to Virginia business leaders, said “the timing and pace of any rate moves” would depend on the path of inflation over the next year.
“The closer that inflation comes back to target levels, the easier it will be to normalize rates at a measured pace,” Barkin said. “But were inflation to remain elevated and broad-based, we would need to take on normalization more aggressively, as we have successfully done in the past.”
Barkin did not specify how many times he thinks the Fed will raise interest rates in 2022 or when the process of “normalization” would begin.
“Forecasting isn’t easy,” he quipped. “I’m told economic forecasters were created to make weather forecasters look good.”
The central bank has signed that it likely to raise interest rates several times this year after it stops a separate bond-buying program that was also designed to keep rates low. The Fed’s long-run goal is to reduce inflation to an average of 2% a year.