Federal Reserve's Barkin: The logic behind rate hikes may mainly revolve around rising inflation expectations

ME News update. On April 1 (UTC+8), Richmond Fed Chair Boulgin said that companies’ current behavior still shows that they believe high oil prices are only a short-term disruption, and there is currently almost no evidence that this has led consumers to cut spending or to change inflation expectations in a worrying way. Boulgin said on Tuesday: “My instinct is that people are still looking at this issue from a short-term perspective. Gasoline spending has obviously risen significantly, but other spending still looks fairly healthy.” Boulgin said that there are scenarios that could push the Federal Reserve’s policy in any direction, but in his view, the logic for further rate hikes would likely mainly revolve around rising inflation expectations—an outcome that would force policymakers to demonstrate their commitment to keeping inflation near the 2% target. He said: “The case for a rate hike will center on the idea that inflation expectations will eventually start moving upward. But I don’t see that break-through at the moment.” By contrast, the scenario for rate cuts would include inflation rapidly falling from roughly 1 percentage point above the current target level down to 2%, or a weakening in the labor market that would need to be supported through rate cuts. (Jinshi) (Source: ODAILY)