Fed's Barkin sees likely soft landing ahead but notes rate hikes still a possibility

cnbc.com:

Richmond Federal Reserve President Thomas Barkin on Wednesday expressed confidence that the economy is on its way to a soft landing, but obstacles remain that will require caution from him and his fellow policymakers.

While noting progress made on inflation as economic growth has stayed afloat, the central bank official said interest rate hikes remain «on the table» even though Fed officials at their most recent meeting in December indicated that this round of policy tightening is probably over.

«We're making real progress,» Barkin, a voting member this year on the rate-setting Federal Open Market Committee, said in prepared remarks for a speech in Raleigh, N.C. «Now, everyone is talking about the potential for a soft landing, where inflation completes its journey back to normal levels while the economy stays healthy. And you can see the case for that.»

Inflation by the Fed's preferred measure of personal consumption expenditures prices rose 2.6% in November from a year ago, and was up 3.2% excluding food and energy. That's well below its mid-2022 peak but still above the Fed's 2% target. However, Barkin noted that PCE inflation on a six-month basis is at 1.9%

He compared the Fed's job to a pilot bringing an airplane in for a landing, and noted four risks ahead: The economy could «run out of fuel» and growth could reverse; «unexpected turbulence» such as geopolitical events or the banking shock that hit in March 2023; the possibility of «approaching the wrong airport,» where inflation holds above the Fed's 2% target; and a «delayed landing,» where demand holds unexpectedly high, boosting inflation.

«The airport is on the horizon. But landing a plane isn't easy, especially when the outlook is foggy, and headwinds and