The inflationary specter over the Fed shows no end
Tom Barkin, President of the Richmond Federal Reserve, assessed that the recent inflation rise in the United States could have significant implications for future Fed monetary policy decisions.
According to Bloomberg, Barkin said in an interview that the latest figures "are too high."
The banker referred to the PCE index, the Fed’s preferred inflation measure, which rose by 4,1% year‑on‑year in May, reaching its highest level since April 2023.
We wrote more about this in the article: Dollar rate under Fed policy pressure. Is the inflation surprise just the beginning?
Moreover, some of Barkin’s colleagues fear rising service prices and point out that keeping inflation above the Fed’s 2% target for over five years could raise consumer inflation expectations, making a return to price stability more difficult.
“It is hard to be convinced that inflation will return to 2% if the federal funds rate, the labor market, or other factors that could cause deflation in the opposite direction do not influence it,” he added.
A government official welcomed the sharp drop in fuel prices in his district, a result of lower oil prices following a recent cease‑fire agreement between the United States and Iran.
In his view, inflation could be boosted by the dynamic development of artificial intelligence infrastructure.
“Companies, when setting prices, factor in today’s inflation as a factor, so I believe inflation has some durability,” Barkin said.
“I am concerned about this, and it is one of the reasons why I believe that a moderately restrictive approach is a reasonable solution,” he added.
Nevertheless, price pressure from tariffs and chaos in energy markets should currently weaken, which, according to Barkin, should help slow inflation.
Source: Trading Economics.
The Federal Open Market Committee (FOMC), chaired for the first time in June by Kevin Warsh, decided to keep interest rates unchanged in the range 3,5-3,75%.
More and more policymakers warn, however, that the Fed may be forced to raise rates this year to curb inflation growth.
Source: Trading Economics.
Read also: Dollar rate on a long road to 4 PLN? Expert issued forecasts for USD/PLN and EUR/USD. “The dollar could gain.”
See also: Will the dollar surprise again? Expert issued a forecast for USD/PLN and EUR/USD. “It’s hard for me to believe there will be no more fires.”
Dollar and euro rates on Monday, June 29
The dollar to zloty rate on Monday, June 29 is at 3,76 PLN.
Chart. Dollar to zloty rate (USD/PLN)
Source: Trading Economics.
The euro to dollar rate reaches 1,13 USD.
Chart. Euro to dollar rate (EUR/USD)
Source: Trading Economics.
Read also: Dollar rate before a chance to break out? Expert: “Capital will flow back to USD.”
See also: Dollar rate before a “nervous and dynamic” move, euro waiting for a drop? Expert issued a forecast for USD/PLN and EUR/USD.
Source: Bloomberg.
