Fed’s Barkin says rate hikes must continue until inflation stays at 2%

Despite positive inflation data this week, Richmond Federal Reserve president Thomas Barkin said Friday that more rate hikes will be needed to ease price pressures.

This week’s releases showing the consumer and wholesale price increases that eased in July were “very welcome,” Barkin told CNBC’s “Squawk on the Street” in a live interview.

“So we’re happy that inflation is starting to come down,” he added. But he noted, “I’d like to see a period of sustained inflation under control, and until we do, I think we’ll just have to keep pushing rates into restrictive territory.”

According to the Bureau of Labor Statistics, general consumer prices were flat in July, while producer prices fell 0.5%.

However, those were only one-month data: the CPI was still up 8.5% year-on-year and the producer price index rose 9.8%. Both numbers are still well above the Fed’s long-term 2% inflation target, so Barkin said the central bank should keep pushing until it hits its target.

“You’d like inflation to stay at our target of 2% at the PCE, and I’d like to see it stay at our target for a period of time,” he said. The Fed uses the price index for personal consumption expenditure as its preferred gauge; June’s headline PCE was 6.8% yoy, while nuclear excluding food and energy was 4.8%.

Barkin’s comments mirror those of most Fed officials who have talked about rates recently.

The central bank has raised its benchmark lending rate by 0.75 percentage point at each of its last two meetings. Markets are divided on whether the Fed will rise three-quarters of a point or taper to a half-point in September, with traders leaning slightly towards the latter, according to data from the CME Group Friday morning.

Whatever the case, Barkin said acting aggressively is important now. He said his voters are very concerned about inflation and want action from the Fed.

“Consumers really don’t like inflation, and one message I hear loud and clear as I wander through my district is, ‘We don’t like inflation,'” he said.

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