Richmond Fed President Thomas Barkin on Tuesday described December's inflation data as "encouraging," though he noted that inflation often surges early in the year and expressed hope that the inflation rate would remain moderate in the coming months. "It's a delicate balance, I think, at the moment," Barkin told the CFA Society in Washington. He pointed out that while inflation is above target, it does not appear to be accelerating, and the unemployment rate is not out of control. "No one wants inflation expectations to become entrenched, and no one wants the job market to deteriorate further," Barkin said. "There's a possibility that neither will happen." The Federal Reserve cut its policy rate by 75 basis points last year and hinted in December that it might pause rate cuts in the new year to assess the economy's needs. Government data released on Tuesday showed that the U.S. Consumer Price Index (CPI) rose 2.7% year-over-year in December. Barkin said this was "encouraging" because it did not rebound as some had expected. The Fed's inflation target is 2%, but it uses a different inflation gauge, which will be calculated in the coming days after more data, including producer prices, is released. Last week, the monthly employment report from the U.S. Labor Department showed the unemployment rate was 4.4% in December, slightly lower than the previously official figure but higher than the same period a year ago. Barkin does not believe these developments warrant an urgent response from the Fed. "Most of our interest rate actions take about 12 months to have their full effect, so when you're uncertain about which path to take, you have some time to think about these things," he said. "No single meeting is truly that critical, right? You might get it wrong, but you know you can correct it at the next meeting." He declined to comment on "what's in the news reports," referring to the U.S. Justice Department's threat to sue Fed Chair Jerome Powell. Powell has criticized the move as an intimidation tactic by the Trump administration aimed at pressuring the Fed to lower interest rates. Barkin only stated, "Countries with independent central banks have better economic outcomes."
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