War May Trigger Inflation Risk. President of the Federal Reserve (The Fed) Bank of Richmond Thomas Barkin said that policymakers still have time to decide on the direction of interest rate policy to return inflation to the 2% level.
Although the direction of inflation is not yet clear, he said the Fed has time to see whether we have done enough, or whether there is still more to do.
The head of the Bank of Richmond said that the inflation rate had slowed to 3.7% in September 2023. US inflation has flattened or fallen from its peak of 9.1% in June last year, although it has not yet returned to the target target.
Barkin, who did not vote on interest rate decisions this year, said he supported the Federal Open Market Committee’s decision not to raise interest rates at its September 2023 meeting so that officials could gather more data to assess the impact of cumulative tightening so far.
Fed officials have signaled they are likely to keep policy on hold for a second straight time next month, after a recent rise in bond yields tightened financial conditions.
However, a rate hike is unlikely as data continues to show the resilience of the US economy, including retail sales and factory production figures released on Tuesday.
Fed officials see a number of risks, including food price shocks and a stronger housing market, that could reignite inflation. Additionally, an expected war between Israel and Hamas threatens to keep energy prices high, thereby driving price growth.
War May Trigger Inflation Risk. He said even the best policies have the potential to be disrupted by external events, as we have been reminded by the latest news from the Middle East, namely the Israel vs Hamas war.