(Bloomberg) -- Federal Reserve Bank of Richmond President Thomas Barkin said it’s too soon to know if another interest-rate increase will be needed, noting that headwinds from a potential government shutdown could create more uncertainty for the economy.
“I don’t think the kind of growth we saw in the second, third quarter is likely to continue,” Barkin said Thursday during an interview with Bloomberg Television. Asked if he thought another rate hike was needed this year, Barkin said it is “too early for me to know. I think there are a wide range of possible outcomes.”
Barkin, who doesn’t vote on the policy this year, said he expects to learn more about the trajectory of the economy and inflation in the next several weeks and months.
The Richmond Fed chief said that if there is a government shutdown and it goes on long enough to interfere with the release of government unemployment and inflation data, it “would be hard to figure out what’s actually happening in the economy.”
“We have a lot of workers who are employed by the government and of course there are a lot of citizens who they serve and this just creates uncertainty,” Barkin said. “I don’t have any idea how long this will last or what will actually happen but, you know, as it plays out, there absolutely are implications.”
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Policymakers left the target range for their benchmark rate unchanged this month at 5.25% to 5.5% — a 22-year high. But fresh quarterly projections showed 12 of 19 officials favored another rate hike in 2023, underscoring a desire to ensure inflation continues to decelerate. One Fed official sees rates peaking above 6% next year, while US central bankers overall see fewer cuts in 2024 than previously anticipated, in part due to a stronger labor market.
Barkin said he expects the labor market will need to soften to bring inflation down to the Fed’s 2% target, but he doesn’t anticipate as much weakness as what has been required in the past.
“I don’t think that’s going to have the kind of trauma on the labor market it may have historically had because businesses are still very loathe to fire workers,” Barkin said.
Barkin said an increase in bond yields is a sign that financial conditions are tightening after loosening over the summer and he will be watching to see if that affects demand and inflation.
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