Barkin Warns of ‘Inflation Headwinds’ That May Force Fed to Raise Rates

Richmond Fed President Tom Barkin warned that interest rates might need to go up, not down, to fight inflation. Speaking to a local club in Virginia, he explained that several economic shifts could make inflation harder to control in the future. For years, certain factors helped keep prices stable, but now the economy faces “headwinds” from problems with global supply chains, fewer working-age Americans, and higher government spending on aging populations and defense.

While these challenges aren’t certain, Barkin believes the Fed should be careful about cutting rates too quickly. He reminded listeners about the 1970s, when the Fed eased policy too soon and inflation returned worse than before. This cautious stance contrasts with financial markets, which currently expect the Fed to cut rates twice this year. Despite some recent signs of economic weakness, Barkin sees the economy as generally healthy with a strong job market. He prefers to wait and see how things develop before making major policy changes.