Fed’s Barkin says US economy firming but inflation risks persist

Investing.com -- US economic conditions are firming, with continued consumer spending and strength beyond the artificial intelligence sector keeping the Federal Reserve focused on inflation, Richmond Fed President Tom Barkin said on Tuesday.

"The risks to inflation outweigh the risks to maximum employment. That's why we raised rates," at last week's meeting, Barkin said in remarks prepared for the CFA Society Baltimore. He added that the quarter-percentage-point increase "will help" restore inflation to the Fed's 2% target.

"Will additional hikes be required, and how many? We'll see," said Barkin, who is not a voting member of the central bank's rate-setting Federal Open Market Committee this year.

The Fed last week raised its policy interest rate to the 3.75%-4.00% range, with investors anticipating more increases.

Barkin's remarks follow those of other Fed officials who have broadened their concerns about inflation that they believe is being driven increasingly by strong demand in the economy, rather than just by energy, tariff and other supply issues that might be expected to fade on their own.

Even those "'passing' shocks aren't proving to be short-lived, or one-off events," but are producing more persistent price pressures than initially expected, Barkin said.

"It is tempting to try to blame high inflation on a handful of categories with particularly high exposure to the Middle East conflict or to tariffs," he said. Much of the Personal Consumption Expenditures Price Index is increasing at greater than a 3% annual rate.

"I am hearing momentum outside of data centers, too. The defense sector is hot. Manufacturing contacts are starting to sound more upbeat. Bankers tell us pipelines are healthy," Barkin said.

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