Thomas Barkin, president of the Fed’s Richmond, Virginia, branch says the Fed must put inflation to bed by keeping rates high. In his interview with the Financial Times Barkin said, “You do have to move to a level where inflation expectations come down in order to have enough restriction on the economy to bring inflation down…The destination is real rates in positive territory and my intent would be to maintain them there until such time as we really are convinced that we put inflation to bed.”
Brainard is also on board. This is similar to remarks made earlier this week by Federal Reserve Vice Chair Lael Brainard who said, “While the moderation in monthly inflation is welcome, it will be necessary to see several months of low monthly inflation readings to be confident that inflation is moving back down to 2 percent,”
With regards to how fast the Fed should reach this level Barkin told the Times ” “I have a bias in general towards moving more quickly, rather than more slowly, as long as you don’t inadvertently break something along the way.”
Powell’s plan. Fed Chair Jerome Powell, of course, was the first to make it clear that the Fed would be staying the course with elevated rates to ensure that price stability is returning. Powell said at Jackson Hole last month, “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy…”
Next FOMC meeting. Currently, the CME Group’s Fed Watch has an 82% chance that the Fed will raise rates 75 bips in two weeks.