‘On the ground, I am hearing that demand is softening,’ Richmond Fed president says
The U.S. economy may be softer than the data suggest and this weakness may be helping to moderate inflation pressure, said Richmond Fed President Tom Barkin said Tuesday.
“There’s a story — a plausible story — that weakening demand is already working to bring inflation down to 2%,” Barkin said in a speech to the Real Estate Roundtable in Washington DC. While retail sales were strong in September and estimates of third quarter GDP are being revised higher, Barkin said that business contacts are telling him that demand “is softening.”At the same time, the labor market is “coming into better balance” and wage pressure has moderated.Most, but not all, businesses think that the “period of major pricing power is behind them,” he said.
Barkin said the path for inflation “isn’t yet clear” and there is a wide range for potential outcomes for the economy, The Fed “is walking a fine line” trying not to overcorrect and damage the economy or “undercorrect “and allow inflation to re-emerge.
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