Fed confident inflation is heading toward 2% target

Michael Barr, the vice chair of the Federal Reserve’s Supervision Committee, sent out a statement to news outlets late on Wednesday stating that the FOMC and the Fed as a whole are still optimistic that US inflation will approach the 2% target.

Barr is closely watching the situation and does not detect any indications of liquidity issues across financial systems. Barr believes that the Consumer Price Index (CPI) data for January serves as a warning that the road to 2% inflation will be rocky.

While there are still some areas of risk in office and commercial real estate, Barr claims that the US financial system is still robust. Although January’s inflation and jobs data were better than anticipated, the Fed is examining the whole set of data.

Barr mentioned the most recent press conference held by Federal Reserve Chairman Jerome Powell about the FOMC’s general outlook. Barr also made a hint about how existing home sales and purchases are being hindered by high mortgage rates.

Key Quotes

Data suggests Fed is on a good path, but too early to say if there will be a soft landing.

The FOMC remains confident that it is on the path towards 2% inflation.

Fed’s Barr needs to see continued good data before advocating for rate cuts.

FOMC plans to hold in-depth discussions of balance sheet activity soon.

Fed balance sheet rundown is operating smoothly, reserves remain plentiful.

“I fully support what he called a careful approach to considering policy normalization given current conditions.”