By Howard Schneider
GREER, South Carolina, Nov 9 (Reuters) – The US central bank should move its monetary policy “with care” as it maps a response to inflation that remains its greatest risk, Richmond Federal Reserve President Tom Barkin said on Monday.
Businesses continue to face rising costs and say they are planning to try to pass them along, Barkin said in remarks prepared for delivery to the Greater Greer Chamber of Commerce in South Carolina.
After nearly six years in which inflation has been above the Fed’s 2% target, “the risk lies on the inflation side of our dual mandate,” Barkin said.
“With demand healthy and inflation stubbornly elevated, the appropriate direction of monetary policy is relatively straightforward,” said Barkin, who will become a voting member of the central bank’s policy-setting committee in 2027. Investors currently expect the Fed to raise rates at its December 8-9 meeting.
But “it is wise to move policy with care,” Barkin said, given risks that could hit the labor market and the Fed’s maximum employment goal.
The buildout of artificial intelligence technology, Barkin said, was “particularly consequential” in that regard, a fact highlighted by large swings in technology stocks — and the probabilities attached to Fed rate increases — in the days following the US midterm elections last week.
If the new technology “underdelivers,” Barkin said, it could curb business investment, stock prices and consumer spending, undercutting a key source of growth and possibly boosting unemployment.
In addition, “AI could overdeliver and displace more workers than expected,” he said.
(Reporting by Howard Schneider; Editing by Paul Simao)
