Fed's Barkin is open to half-point rates hike in May

(Bloomberg) The chairman of the Federal Reserve Bank of Richmond, Thomas Barkin, said he is open to raising interest rates by half a percentage point at the Fed's monetary policy meeting in May, depending on how strong the US economy is at that time.

“I'm open to it,” Barkin said Wednesday in an interview with Michael McKee of Bloomberg Television. “I think the question, and we will make this decision when we get to the meeting in May, is how strong the economy still looks in terms of its ability to accept rate increases and how high inflation persists. I am looking at both indicators and we will make our decision in May.”

Markets expect a greater likelihood that the Federal Open Market Committee (FOMC) will raise interest rates by half a point to offset the highest inflation in four decades when it meets May 3-4.

Fed officials raised their benchmark loan rate from zero this month with a quarter-point increase. Since then, several FOMC members, including Philadelphia Fed President Patrick Harker, have said they are open to a steeper half-point rate hike at their May meeting. Fed Chairman Jerome Powell said he would favor a larger increase if necessary to control price pressures.

Barkin noted that interest rates may need to rise above the neutral level to reduce inflation. Monetary policymakers estimate that this level, which neither accelerates nor slows down the economy, is around 2.4 per cent.

“I think there's a real possibility that it's true,” he said. “As we approach neutral, we will be able to make that decision.”

In the Federal Reserve's March interest rate projections, the median of officials' projections was that the benchmark rate would end 2022 at around 1.9%, in line with operators' bets at that time, but higher than previously predicted, and would then rise to around 2.8% in 2023.

Original Note:

Fed's Barkin Says Half-Point Hike Depends on Economy in May

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.