(Bloomberg) -- Federal Reserve Bank of Richmond President Thomas Barkin said the central bank was resolved to curb red-hot inflation and that there is a risk the efforts could cause a US economic recession.
“We’re committed to returning inflation to our 2% target and we’ll do what it takes to get there,” Barkin said Friday during an event in Ocean City, Maryland. He said that this could be achieved without a “tremendous decline in activity” but acknowledged that there were risks.
“There’s a path to getting inflation under control but a recession could happen in the process,” he said.
The US central bank hiked interest rates by 75 basis points in July for the second straight month as policy makers tackle inflation that’s running near 40-year highs. Fed officials speaking in recent days have said more rate increases are needed, but they are still deciding how big to move at their next policy meeting.
St. Louis Fed President James Bullard, one of the most hawkish policy makers, on Thursday urged another 75 basis-point move while Kansas City’s Esther George struck a more cautious tone.
Barkin said last week that he was undecided on whether the Federal Open Market Committee should raise rates by 50 basis points or 75 basis points in September. A Labor Department report for July showed that the US economy added 528,000 jobs that month, more than double what forecasters were projecting, and the unemployment rate ticked down to 3.5%, matching the pre-pandemic low.
But a separate report on Aug. 10 showed that consumer prices rose 8.5% in the 12 months through July, down from the 9.1% increase in the year to June that had marked the highest inflation rate since 1981. Officials will be able to review another jobs report and one more inflation reading before they meet next month.
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