Richmond Federal Reserve Bank President Thomas Barkin said on Thursday he could not yet judge what the Fed needs to do on monetary policy before the end of the year.
When it comes to the prospect of another rate hike before the end of the year, Barkin believes it is "too early" to draw conclusions.
"I think the economy faces a wide variety of possible outcomes, and because of that uncertainty, it's better for the Fed to take some time to see how the data plays out," Mr. Barkin said in an interview.
He predicted slower growth than at the start of the year, saying "I don't think the kind of pace we saw in the second and third quarters is going to be sustainable", although he still said the economy would continue to expand amid some expected weakness in consumer spending by low - and middle-income households.
The government shutdown complicates the situation
Barkin acknowledged that a possible government shutdown would complicate the Fed's ability to read the economy. House Republicans have so far failed to agree on a spending bill needed to keep the government open, threatening the collection and publication of economic data.
If the government shuts down, the authorities will not be able to timely release some important economic data, such as the unemployment rate and inflation rate.
Barkin said employment data is the best information about the job market, and without it, it would be difficult to know what is actually happening in the economy. Fortunately, the experience of the pandemic has prompted the Fed to look for other real-time data, such as credit-card spending, which may prevent the Fed from acting entirely blindly.
Barkin promised, "We'll do our best. Accept the circumstances as they are and do your best to figure out what's going on."
A determination to ensure that inflation slows
Policymakers this month left the target range for the benchmark interest rate unchanged at 5.25 per cent to 5.5 per cent, already the highest in 22 years.
The latest quarterly forecasts showed 12 of 19 officials leaning towards another rate hike in 2023, underlining a determination to ensure inflation continues to decelerate; And officials generally see less rate cuts in 2024 than previously thought, in part because of a strengthening labor market.
Barkin predicted that only a softer labor market would bring inflation down to the Fed's 2 percent target, though he noted that "it's not going to be as traumatic to the labor market as it has been in the past because firms are still very reluctant to fire workers."
It's also worth noting that the rise in Treasury yields is a sign that financial conditions are gradually tightening after the summer easing, and Barkin said he will be watching closely to see if that affects demand and inflation.