The president of the Richmond Federal Reserve said doggedly high U.S. inflation justified the central bank’s move to raise interest rates again despite turmoil in the banking system.
“Inflation is high. Demand hadn’t seemed to come down. And so, the case for raising was pretty clear,” Thomas Barkin told CNN in an interview on Friday.
The Fed lifted a key interest rate on Wednesday to the highest level in almost 16 years as it battles to bring down inflation. The rate of inflation stood at 6% as of February, based on the consumer price index, or more than three times the pre-pandemic average.
Rising borrowing costs temper inflation by slowing the economy.
Yet the Fed also debated whether to delay another rate hike after the failure of Silicon Valley Bank two weeks ago spawned a fresh banking crisis. The Fed and other U.S. regulators swiftly intervened to contain the damage.
Barkin said the banking system stabilized before the central bank ultimately decided to raise rates. A new emergency lending program created by the Fed appeared to help restore calm on Wall Street
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“For me, the question was: Do you see such stresses happening that you felt like you really had to pull back and learn more?” Barkin said to CNN. “It felt very stable by the time we got there.”
Barkin is not a voting member this year of the Fed’s interest-rate setting panel.
