(Bloomberg) — Federal Reserve Bank of Richmond President Thomas Barkin said the US central bank needs to keep borrowing costs elevated for longer to lower inflation to its 2% target, citing higher prices in the services sector.
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Barkin in a CNBC interview said US demand will need to slow a bit to get inflation to the Fed’s goal, noting goods inflation has come down significantly as supply chains have healed.
“To get to 2% sustainably in the right kind of way, I just think it’s going to take a little bit more time,” he said Thursday. “I still think there’s just a lot of movement on the services side and it’s going to take a little bit of time. I do believe we are on the right path here.”
Fed officials have kept interest rates unchanged since their July meeting, and stronger-than-expected inflation data have kept officials from lowering interest rates from the highest levels since 2001. Investors now expect just under two rate cuts this year, from as many as six seen at the start of 2024.
Read more: What Fed’s Rate-Cut Delay Means for US and World: QuickTake
A measure of underlying US inflation cooled in April for the first time in six months, Bureau of Labor Statistics figures showed Wednesday. The so-called core consumer price index — which excludes food and energy costs — climbed 0.3% from March, snapping a streak of three above-forecast readings which spurred concern that inflation was becoming entrenched.
Barkin said Wednesday’s report of stagnant retail sales for the past month suggests “good but not great consumer spending,” adding “that was one piece of the puzzle, which is how hot is demand.”
Read more: Powell Reiterates Fed Likely to Keep Rates Higher for Longer
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