Fed’s Barkin says progress slow on inflation solution

WASHINGTON – A top Federal Reserve official downplayed recent signs that the economy is strengthening, but also said he is prepared to keep raising interest rates in smaller increments as often as needed to quell inflation. Richmond Federal Reserve President Thomas Barkin said Friday that recent data showing an unusually robust job gain and a spike in retail sales last month reflected in part the impact of warm weather and the government’s seasonal adjustment process, rather than an acceleration of growth that could push inflation higher.

“I’m not taking as much signal from the data that we’ve gotten recently,” Barkin said in a roundtable with reporters. Though he added that could change “if you start to see it for multiple months.” Barkin is a member of the Fed’s 19-person interest rate setting committee.

The strong jobs and retail sales reports, along with hotter-than-expected inflation figures, have prompted several Wall Street economists to pencil in more interest rate hikes by the Fed this year. Those increases will likely raise borrowing costs for mortgages, auto loans, credit cards and business loans.

Economists from Bank of America and Goldman Sachs both now expect the Fed will lift rates to a range of 5.25% to 5.5%, a quarter-point higher than the Fed itself projected at its December meeting. Its rate is currently 4.5% to 4.75%, the highest in 15 years.

Barkin’s comments follow tougher talk from other Fed officials this week, such as Cleveland Fed president Loretta Mester, which has pushed stock and bond prices lower as investors increasingly expect more rate hikes.

In his remarks, Barkin also cautioned that measures of underlying inflation remain high and may require additional rate increases.