Fed’s Barkin: Hope Fed can restore rates to pre-pandemic levels quickly

Richmond Fed President and FOMC member Thomas Barkin said on Thursday that he hopes the Fed can restore interest rates back to pre-pandemic levels fairly quickly, reported Reuters.

Barkin added that it is timely to normalise rates given strong demand, the tight labour market and high inflation. Barkin said that he expects goods prices will be disinflationary or perhaps even deflationary, offsetting a rise in service prices. If oil prices continue to rise, Barkin added, this would absolutely hurt consumer spending.

The Russian invasion of Ukraine probably will not change the “underyling logic” behind the Federal Reserve’s plans to raise interest rates, but the impact on global markets and commodity prices in particular will need to be watched carefully according to Barkin.

US interest rates should move higher because “underlying demand is strong. The labor market is tight. Inflation is high and broadening,” Barkin said in comments to the Maryland Chamber of Commerce. Despite the events in Ukraine, “I don’t think you are going to see much change to the underlying logic…But this is uncharted territory so we will have to see where the world goes”.