Fed's Barkin: No view yet on rate hike appropriate for May meeting

Federal Reserve Bank of Richmond President Thomas Barkin poses during a break at a Dallas Fed conference on technology in Dallas
Federal Reserve Bank of Richmond President Thomas Barkin poses during a break at a Dallas Fed conference on technology in Dallas, Texas, U.S., May 23, 2019. REUTERS/Ann Saphir

RICHMOND, Va., March 30 (Reuters) - Richmond Federal Reserve bank president Thomas Barkin said Thursday that he had not come to a view yet on what rate increase might be appropriate at the Fed's May 1-2 session, and is "comfortable" with meeting-by-meeting decisions on whether or not to move by a quarter of a basis point.

So far, he said, it did not seem as if the failures of Silicon Valley Bank and Signature Bank would lead to a broader financial crisis, with deposit flows now "relatively stable."

Inflation, meanwhile, "is still very high. The job market is still really tight," he said in comments to the Virginia Council of CEOs.

"There is a lot of uncertainty about what if anything this bank situation does to consumer confidence, business confidence, business investment, consumer spending, availability of credit....There are a lot of questions about what is going to happen to demand and inflation," Barkin said. "It is pretty hard to know here on the 30th of March."

"I'm comfortable with the trajectory we're on now -- meeting by meeting, whether you need a 25 basis point hike or not," Barkin said. "You'll never get it perfect but if you are not quite right you're not going to get it that far wrong."

The Fed raised interest rates at its last meeting by a quarter of a percentage point, to a range between 4.75% to 5%, and indicated further increases would hinge on whether credit tightened appreciably in the wake of recent bank failures.

Barkin said the focus now was on balancing concerns about financial stability with data showing inflation still high and overall demand still strong.

But so far he said the evidence does not point to financial contagion.

"It’s worth remembering that not every bank failure becomes Lehman Brothers," Barkin said, referring to the banking collapse that helped spark a financial crisis 15 years ago.

"There are still, to be sure, a few individual banks working through their own issues," Barkin said in comments prepared for delivery to the gathering. But "banks have worked with intensity to ensure they have adequate liquidity. And, as I’ve talked to banks in my district, I’ve been encouraged by the resilience I’ve seen."

Reporting by Howard Schneider; Editing by Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Covers the U.S. Federal Reserve, monetary policy and the economy, a graduate of the University of Maryland and Johns Hopkins University with previous experience as a foreign correspondent, economics reporter and on the local staff of the Washington Post.