Richmond Federal Reserve President Tom Barkin believes that the United States has managed to avoid a recession due to the influence of pandemic-related changes in the economy. However, he foresees a slowdown in growth as a result of higher interest rates.
The Impact of Fiscal Support Programs Ending
Barkin suggests that further slowing is expected soon. With the conclusion of several pandemic-era fiscal support programs, the effects of rate increases are likely to become evident. According to various models, the impact should start to take effect around this time.
Concerns About Inflation
In his speech in Blacksburg, Virginia, Barkin acknowledges that inflation levels remain too high. However, he does not disclose whether he supports another increase in interest rates at the Federal Reserve's upcoming meeting in September.
Barkin's Role at the Federal Reserve
It is important to note that Barkin is not a voting member of the Fed's interest-rate setting panel this year.
The Recent Interest Rate Adjustment
Just last week, the Federal Reserve raised a key short-term interest rate for the 11th time in less than a year and a half. This increase brought the rate up to a top end of 5.5%, a significant rise from near zero in the spring of 2022.
Balancing Inflation and Economic Growth
The central bank's aim has been to curtail inflation while avoiding a recession. However, higher borrowing costs typically have a dampening effect on economic growth.
Future Considerations for Interest Rate Adjustments
As of now, the Federal Reserve is still deliberating on whether to raise rates once again in September.