Fed’s Barkin States There is ‘Plenty of Time’ to Determine Next Policy Move

By Michael S. Derby

Federal Reserve Bank of Richmond President Thomas Barkin stated that recent softer job data aligns with the central bank’s goal of lowering inflation, but he is not yet prepared to determine the next steps for the Fed’s monetary policy. In an interview, he emphasized the importance of upcoming inflation reports, noting, "I’m not going to prejudge. I value the optionality of seeing what we’re going to see in the data…and I think that’s what’s going to matter to me."

Barkin highlighted that there is ample time before a decision must be made regarding interest rate hikes or maintaining the current short-term rate target. He was the first Fed official to comment following the latest Federal Open Market Committee meeting and the release of October’s job data. The FOMC decided this week to keep its interest rate target steady between 5.25% and 5.5%, while still considering the possibility of future rate increases to achieve the 2% inflation target.

The jobs data indicated that the Fed does not need to hastily raise rates, showing a modest job gain of 150,000 and a slight uptick in the unemployment rate to 3.9% from 3.8% the previous month. Barkin remarked on the disconnect between the data and what he hears on the ground, noting the job market appears to be moving toward better balance. He welcomed the October hiring data, recognizing it as a continuation of the gradual easing expected in the job market.

A contributing factor for the Fed’s decision to keep rates steady this week has been the tightening financial conditions brought about by rising bond yields, which have increased real-world borrowing costs. However, since the Fed’s meeting, bond yields have experienced a significant decline. Barkin refrained from linking this decline to any immediate changes in monetary policy.

"I’d like to think the markets responded to the data," he said regarding the drop in yields, pointing out that the latest data indicates a gradual reduction in job market pressures. He suggested that this is likely what those hoping to avoid further rate hikes would want to see, explaining the market movements.

Additionally, Barkin cautioned that the Fed has limited influence over longer-term market prices. He noted, "As financial conditions are affecting the economy in a direction that takes us the right way, that helps, but it’s not really a policy variable; they’re pretty volatile, we don’t control them."