The Federal Reserve had been stepping on the gas in its effort to raise interest rates this year and can now pump the brakes, said Richmond Fed President Tom Barkin on Friday.
“When you get your foot on the brake, you just think about steering in a very different way. Sometimes you act a little more deliberately and I’m ready to do that,” Barkin said, in an interview on CNBC.
The implication of stepping on the brake is a slower pace of interest rate increases, over a longer period of time and “potentially a higher end-point,” Barkin said.
How high the Fed needs to raise its benchmark rate depends on the behavior of inflation, he added.
It is conceivable that the Fed’s benchmark rate would rise above 5%, “but that’s not a plan,” Barkin said.
Earlier this week, the Fed raised its benchmark rate by the 4th jumbo-sized 0.75 percentage point to a range of 3.75%-4%.
The central bank has signaled it could slow to a half-percentage point hike in the December meeting.
At the same time, Fed Chairman Jerome Powell said that the central bank was not thinking about pausing rate hikes and that the ultimate level of rates would likely be higher than the 4.5%-4.75% range that the central bank signaled in September.
In the interview, Barkin said the October job report published Friday showed that the labor market remains tight “and that means there’s still more work to do.”
Read: U.S. economy added 261,000 jobs in October
The Richmond Fed president said inflation hasn’t moved down much yet because businesses have not gotten any signal from their customers or their competitors that raising prices would hurt sales.
“Firms have gotten a taste of increasing prices. And you can see, in some of the more recent announcements, there’s still a sense that prices still have a room to go,” Barkin said.
U.S. stocks were sharply higher on Friday with the Dow Jones Industrial Average
DJIA,
up over 500 points. The yield on the 10-year Treasury note
TMUBMUSD10Y,
inched down to 4.13%.
