Thomas Barkin, president of the Richmond Federal Reserve Bank, reiterated at an event at the Economic Club of New York on Feb. 8 that policymakers have time to be patient about the timing of the rate cut, pointing to a strong labor market and continued cooling inflation.。

Be cautious about inflation Be patient with rate cuts

Barkin says no one wants inflation back up。Given the current strong demand and historic levels of the labor market, there is reason to step by step and build this (inflation receding) confidence before starting to cut interest rates。Barkin acknowledged that while recent economic data was "remarkable," he said he was also looking for more evidence that the inflation slowdown was "expanding and sustainable."。

Barkin has the right to vote on the Fed's monetary policymaking。Earlier, he said in an interview that he would "very much like to see this trend continue and expand" as policymakers get "more months" of inflation data.。He noted that commodities played an important role in the slowdown in U.S. price growth。

At the just-concluded Fed's January 2024 policy meeting, the Fed held back four times in a row, setting interest rates firmly at 5.25% -5.50% high。At a press conference, Fed Chairman Jerome Powell dismissed market expectations of a rate cut as soon as March, saying that "the policy committee would like to see more data to gain confidence that inflation will continue to fall to the 2% policy target."。"

Asked if he agreed with Powell's statement that a March rate cut was likely to be modest, Barkin said: "I never prejudge the meeting, nor do I prejudge the March meeting.。We'll see what happens, but I've always believed that Chairman Powell is the face of the committee。"

Inflation faces four upside risks Commercial real estate is a hidden danger.

In his speech, Barkin also outlined several risks to the inflation outlook, including an easing financial environment and a rebound in consumer sentiment.。He also noted that the economy has seen broader changes due to the pandemic, including tight labor markets and inadequate housing supply, which could put upward pressure on prices.。

Looking back, the Fed's preferred inflation measure peaked in 2022 7.1%。With the Fed's violent rate hikes, that number had already fallen to 2 by the end of 2023..6%, still some way from the Fed's ultimate goal of 2%。It's worth noting that the easing of high inflation has barely hit the labor market, with the latest data showing that U.S. non-farm payrolls jumped 35 percent in January..30,000, unemployment stuck at 3.7%, has been stable in the past two years below 4%。

According to the Fed's median interest rate estimate last December, the Fed's policy committee will cut the policy rate three times in 2024, signaling that the current rate has peaked.。

Barkin argues that there is another hidden danger in the U.S. economy, which is commercial real estate。He stressed that commercial real estate stress risk is a well-known and important issue.。In the banks we regulate, we spend a lot of time with them, conducting fruitful inspections of real estate assets and trying to understand what risks exist and how much reserves are against them。

Shares of New York Community Bancorp have plunged this year as the regional lender reported unexpected losses related to deteriorating credit quality.。The incident also raised concerns about the potential consequences of commercial real estate loans from other U.S. banks.。