The US economy appears to be gaining strength, with resilient consumer spending and momentum extending beyond the artificial intelligence boom. This keeps the Federal Reserve’s attention firmly on inflation, Richmond Fed President Tom Barkin said on Tuesday, Reuters reported.
Barkin said inflation currently poses a greater threat than weakness in the labour market, explaining that this prompted the Fed to raise interest rates last week. He said the quarter-percentage-point increase “will help” return inflation to the central bank’s 2% target.
“Will additional hikes be required, and how many? We'll see,” said Barkin, who is not a voting member of the rate-setting Federal Open Market Committee this year.
The Fed last week lifted its policy rate to a range of 3.75%-4.00%, with investors expecting further increases.
Barkin’s comments echo concerns among other Fed officials that inflation is being driven increasingly by strong demand across the economy, rather than only by energy prices, tariffs and other supply-related pressures that may ease over time.
He further added that even shocks viewed as temporary have lasted longer than anticipated, creating more persistent price pressures.
While some may blame elevated inflation on sectors particularly exposed to the Middle East conflict or tariffs, Barkin noted that much of the Personal Consumption Expenditures Price Index is rising at an annual rate above 3%, according to the Reuters report.
“I am hearing momentum outside of data centres, too. The defence sector is hot. Manufacturing contacts are starting to sound more upbeat. Bankers tell us pipelines are healthy,” Barkin added.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
