Fed's Barkin flags gradual interest rate hikes ahead on inflation concern
In an interview, Richmond Fed President Thomas Barkin said he expects rate increases ahead at a gradual pace, citing concern over inflation.
By BBCorp
What happened
Richmond Federal Reserve President Thomas Barkin said in an interview that he sees interest rate hikes ahead, though at a gradual pace.
He pointed to concern over inflation and said monetary policy will need to adjust.
Why it matters
Comments from regional Fed presidents are one of the ways markets gauge the direction of US policy between formal meetings. When an official links inflation concern to a need for policy to adjust, traders tend to reprice expectations for the path of official rates.
Those expectations feed directly into the dollar through yield differentials, into gold because it pays no yield and is priced in dollars, and into US equity indices through discount rates and the cost of credit. Language about the pace of any move matters as much as the direction, since it shapes how quickly markets assume policy settings change.
What to watch
Further public remarks from Barkin and other Federal Reserve officials on inflation and the appropriate setting of monetary policy, and any confirmation of how gradual an adjustment they have in mind.
Markets in play
- USDExposure: HighShifting expectations for the path of US official rates are transmitted first to the dollar.
- GoldExposure: MediumGold pays no yield and is priced in dollars, so it is sensitive to repricing of US rate expectations.
- US stocksExposure: MediumUS indices are exposed to changes in discount rates and borrowing costs implied by Fed policy talk.
USD
Gold