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With the right to vote on Fomc decisions, Barr said he will continue to evaluate US indicators to make his assessments at upcoming Fed meetings

 

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Oct 2, 2023 4:55 pm

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Updated 1 hour ago

 

Vice President for Supervision of the Federal Reserve (Fed, the American central bank), Michael Barr stated this Monday, 2, that the most important question at this moment is not whether interest rates should rise further or not this year, but by how much time will have to remain at a “sufficiently restrictive level to achieve our goals”. According to him, “this should take some time”, not specified. Inflation has moderated, but still shows resilience “considerably greater than I expected”, he assessed.

 

With the right to vote on monetary policy decisions, Barr said he will continue to evaluate U.S. indicators to make his assessments at upcoming Fed meetings. As part of that task, he will continue to monitor the cost and availability of credit to the economy, he said. the leader, during a speech in New York.

 

According to him, the full effect of the monetary tightening already adopted by the Fed should be felt “in the coming months”. The American Gross Domestic Product (GDP), in turn, should moderate to “slightly below the potential rate” next year, in this tightening context. Available indicators, in any case, suggest that progress is being made to better balance supply and demand in the labor market, he added. For him, there is now a greater chance that the return to price stability will occur without major job losses as seen in past episodes. History, however, suggests “caution” regarding this possibility, he warned.

 

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Barr said he agrees with Fed Chairman Jerome Powell on the importance of price stability so that “the economy works for everyone.” According to him, the Fed's “strong” measures in the recent tightening “have ensured that inflation expectations remain well anchored”.

 

The labor market “is tight” and indicators show that employment continued to expand through August, but the latest data “also suggests that we are making progress to better balance labor supply and demand.” Job growth has moderated, while labor force participation continues to improve, he noted.

 

Barr said he will continue to monitor the availability of credit in the economy. He commented that the squeeze on credit has occurred, with higher interest rates, but at a lower level than he expected in March to be seen. He recalled the failure of Silicon Valley Bank (SVB) and other smaller banks and the official response to calm the situation. According to the director, it is “particularly important” to closely observe how monetary policy and the effects of the March banking stress affect banking behavior and the provision of credit to the economy.

 

In the question and answer session, Barr was also asked about artificial intelligence. He said he has spoken to experts on the subject and has not ruled out that the technology will bring “widespread effects” to the American economy. According to him, the issue is something to be monitored, and could in fact bring important changes, such as increased productivity and job losses in some sectors.