Thomas Barkin, president of the Federal Reserve Bank of Richmond, warned on the 28th local time that inflation is too high and that prices are unlikely to return to target without factors such as currency policy.
Barkin, in an interview with Bloomberg during the "Ideas Festival" in Aspen, Colorado, said, "The level of inflation is too high," adding, "It is hard to be confident that inflation will return to 2% without additional effects from the benchmark interest rate, the labor market, or other factors that cause disinflation."
Barkin also voiced concern about corporations' pricing policies. He said, "Corporations take current inflation into account when setting prices, so I think inflation has some persistence," adding, "That is what is concerning, and it is one reason I think a 'modest tightening' is a reasonable stance."
Corporations are facing a greater expense burden due to rising raw material prices, but as consumers react sensitively to price hikes, they are weighing how much of the increased expense to pass on to consumers.
Meanwhile, Barkin assessed that price pressures from tariffs and oil price shocks are easing, which will help calm inflation.
But he said these two factors have not curbed Americans' spending, which remains strong. He added that in a consumption-led economy, this could be an obstacle to bringing inflation fully down to the Fed's 2% target.
On the 18th, the personal consumption expenditures (PCE) index, which the Fed mainly tracks, rose 4.1% year over year through May, the fastest pace since April 2023. The war in Iran has pushed up prices of crude oil and other commodities, and inflationary pressures are increasing.
Barkin said he will watch future economic indicators more closely and decide currency policy cautiously because factors easing and pushing up inflation coexist at the same time.
He also added that while falling oil prices following a recent cease-fire agreement between the United States and Iran have sent gasoline prices sharply lower, which is a disinflationary factor, there are other variables contributing to inflation, such as expansion of artificial intelligence (AI) infrastructure, so it is necessary to watch how the economy unfolds over the next few months to decide the appropriate policy direction.