Fed’s Barkin: Inflation fight may lead to downturn

Fed’S fight against inflation may lead to a downturn in the US economy but that is a risk that the Fed will have to take, Richmond Fed President Thomas Barkin said on Wednesday, as reported by Reuters.

The US Dollar showed no immediate reaction to these comments and the US Dollar Index was last seen rising 0.35% on the day at 110.00.

Investors are concerned about the possibility of new lockdowns in China after authorities reiterated their commitment to the Zero-COVID policy over the weekend. With coronavirus infections increasing with the winter flu season around the corner, a new set of restrictions is expected to curb global demand for oil over the coming months.

Beyond that, the US dollar steadied on Wednesday, after having depreciated sharply over the last three days, which has contributed further to the WTI decline. The Dollar Index, which measures the value of the dollar against a basket of the most traded currencies, has ticked up to the vicinity of 110.00 after bouncing off 109.30, its lowest level since mid-September.

Key Quotes

“Fed rate hikes challenged by artificial elements in the current economy including high consumer savings, lack of labor supply.”

“Not waiting for those issues to settle on their own, doing what it takes to return inflation to 2% target.”

“Given the experience of the 1970s, Fed can’t let inflation fester and expectations rise.”

“The US could continue to face labor constraints going forward.”

“Supply chains improving but slowly and inconsistently.”