Richmond Fed's Barkin sees 3.7% PCE inflation as 'sticky'

Inflation remains 'sticky' near 3.7% as measured by the Fed's preferred personal consumption expenditures (PCE) gauge, Richmond Federal Reserve President Thomas Barkin said on Tuesday.

Speaking at an event in Maryland, Barkin acknowledged that while inflation has eased from its 2022 peaks, it has not declined enough to warrant immediate policy adjustments. The latest PCE reading, released last week, showed a 3.7% annual increase in June, exceeding the Fed's 2% target.

"We've made progress, but we're not where we need to be," Barkin said. He refrained from signaling a specific path for interest rates at the upcoming September Federal Open Market Committee (FOMC) meeting, emphasizing data dependency in the central bank's decision-making process.

Barkin's remarks underscore the Fed's cautious stance amid mixed economic signals. Recent data has shown resilience in consumer spending and labor markets, while inflation pressures persist in certain sectors. The Fed has held its benchmark federal funds rate steady at 5.25%-5.50% since July 2023, balancing concerns over inflation with risks to economic growth.

Market expectations for a September rate cut have fluctuated in recent weeks, with traders pricing in a roughly 60% probability of a reduction, according to CME Group's FedWatch tool. Barkin's comments did little to clarify the outlook, leaving investors to parse a range of economic indicators for clues.

The Fed's next policy meeting is scheduled for September 17-18, with policymakers set to review labor market conditions, inflation trends, and broader economic activity before making any adjustments.