Richmond Federal Reserve President Thomas Barkin said the U.S. is making “real progress” toward controlling inflation, but rate hikes are still possible.

WASHINGTON – A top Federal Reserve official said Wednesday the economy is on its way to a soft landing, but it’s not inevitable due to lingering economic concerns and obstacles.

Richmond Federal Reserve President Thomas Barkin said the central bank has made strides in taming inflation, but risks might be unavoidable. Comparing the Fed’s job to an airline pilot’s, he noted four risks: the U.S economy can run out of fuel (and see growth declines), experience unexpected turbulence (such as a geopolitical event that would have nationwide impacts), approach the wrong airport and miss the Fed’s 2% target, or face a delayed landing (unexpectedly high inflation).

“So, a soft landing is increasingly conceivable but in no way inevitable,” he told a crowd in a speech in Raleigh, N.C. “I would caution you to focus less on the rate path and more on the flight path — is inflation continuing its descent and is the broader economy continuing to fly smoothly? Conviction on both questions will determine the pace and timing of any changes in rates.”

Barkin’s comments come three weeks after the Federal Open Market Committee (FOMC) decided against raising interest rates for the third consecutive time. The central bank’s latest economic projection summary, issued in December, indicates three rate cuts may be coming in 2024.

Barkin closed his speech, saying, “Forecasting is difficult, and conditions are ever evolving.

“As they do, so too will our approach,” he said. “So, buckle up. That’s the proper safety protocol even if you expect a soft landing.”

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Author: amyc