Richmond Federal Reserve Bank Governor Thomas Bagin said on Friday that as concerns about inflation intensified, he agreed to reduce the economic help provided by the central bank.
As the Fed indicated that it might start to reduce the size of its monthly bond purchases, Barkin said that this seems reasonable and he prefers to start the process in November. The minutes of the Fed’s September meeting indicated that officials hope to start scaling back next month or December.
“If we decide to scale down at the next meeting, we will discuss which of these two dates, I’m sure, my instinct is if you want to decide, move on,” he told in an on-site “Squawk Box” interview Steve Riesman of CNBC. “But I will definitely be open to the debate on both sides.”
Fed officials stated that they have achieved the 2% inflation target, and despite significant progress, the full and inclusive employment part of the task is still difficult to achieve.
Like many of his colleagues, Ba Jin pointed out that temporary factors such as supply chain problems have caused car prices to rise, which is the main factor driving inflation, and the inflation rate is about a 30-year high.
But he also admitted that this is the bigger problem he expected.
“I do think there is a risk on inflation, and I am observing this very carefully,” he said.
The minutes of the meeting show that the pace of bond purchases may slow down by approximately US$15 billion per month—US$10 billion in US Treasury bonds and US$5 billion in mortgage-backed securities.
Fed officials emphasized that even after the start of the reduction, it will take some time before interest rate hikes begin. According to CME Group’s FedWatch tracker, the current market pricing will be adjusted for the first time in July 2022, and another may be adjusted before the end of the year.
Barkin said that his interest rate decision will be based on two factors-whether inflation will remain high or return to normal levels of around 1.5% to 2% over the past 25 years, and how far away the labor market is from full employment.
“Will the labor market be so tight in the next six months? Will inflation go down?” he said. “The different answers to these questions in my mind will give me different views on when to start raising interest rates.”
He was also asked about his position on whether Fed officials should be allowed to hold individual stocks, but refused to answer, waiting for Chairman Jerome Powell (Jerome Powell) to lead a best practice investigation. Several officials came under fire for trading stocks, and two regional chairpersons resigned due to controversy caused by their activities.
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