Fed’s Thomas Barkin says soft landing for US economy looks more likely, but hardly certain

livemint.com:

Federal Reserve Bank of Richmond President Thomas Barkin said a soft landing for the US economy is looking more likely but hardly certain, noting he’d need more conviction about the path of inflation before supporting a rate cut. “A soft landing is increasingly conceivable but in no way inevitable," Barkin, who will vote on policy decisions this year, said in a speech Wednesday.

“Demand, employment and inflation all surged but now seem to be on a path back toward normal." While Barkin reiterated the possibility of further tightening, he didn’t rule out a March interest-rate cut either. When asked about the probability of a cut in March, Barkin told reporters the policy decision is a “long way away." “I try not to prejudge meetings," he said.

Officials kept rates unchanged for a third straight meeting last month and signalled they expect three quarter-point rate cuts this year, according to the median forecast released after the policy meeting. Markets responded by moving forward their bets for rate cuts, with the first seen likely in March.

Several Fed officials, including New York Fed president John Williams, have tried to tamp down expectations for steep reductions in early 2024. While Barkin acknowledged that most officials are expecting cuts in 2024, he said that “conviction on both questions" of inflation continuing its descent and the broader economy’s performance “will determine the pace and timing of any changes in rates." He added that the components of inflation will be important in his determination of whether the pullback in inflation is sustainable.

“When the goods deflationary cycle normalizes, what does that leave us with?" Barkin told reporters. “That’s what I’m looking at there." Barkin defined a soft