Fed Chairman Barkin tells PBS program he won’t prejudge what will be done at next meeting By Reuters

By Michael S. Derby

NEW YORK (Reuters) – Richmond Federal Reserve President Thomas Barkin said he was not prepared to change his monetary policy outlook after surprisingly weak U.S. jobs data on Friday, even as Wall Street moved toward expectations of aggressive interest rate cuts.

“Job growth has been weaker than most professional forecasters had anticipated,” Barkin said in a transcript of a television interview with the Carolina Business Review. But even with the slowdown in hiring numbers in July, “I’m not trying to prejudge the meetings,” while avoiding giving any guidance on rate cuts.

“We’re going to get a lot of data between now and September,” he told the PBS program. “Two full sets of jobs reports, two full sets of inflation measures, a lot of activity measures,” Barkin said, adding that “we’ll make the best decision we can when we get to September.”

Barkin’s comments are the first since the Fed decided Wednesday to leave its benchmark interest rate in the 5.25% to 5.50% range, but opened the door to a rate cut in September amid slowing inflation and a cooling labor market.

The outlook, announced after the end of a two-day policy meeting, received a huge boost from the Labor Department’s monthly employment report for July, which showed a weaker-than-expected increase of 114,000 jobs and a rise in the unemployment rate to 4.3 percent from 4.1 percent the previous month.

Many economists are predicting a more aggressive rate cut, with some considering a half-percentage point cut in borrowing costs rather than a quarter-percentage point next month. JP Morgan economists are wondering whether the Fed will need to ease policy before that meeting, given the possibility that the labor market could hit a snag sooner than expected.

Some have even argued that it was a mistake for the Fed not to cut rates at this week’s meeting, which a number of analysts said was justifiable given the decline in inflation data.

Barkin dismissed the idea that the central bank had made a mistake, saying: “I always assume that there’s going to be just as much criticism no matter what we do. And so if we had acted at the last meeting, we would have gotten just as much criticism that we acted too quickly.”

Barkin said the U.S. labor market remains strong by most standards, noting that the July unemployment rate increase was “pretty normal” on a historical basis and that unemployment levels remain low.

“We’ve been through two years, two and a half years of very turbulent labor markets,” Barkin said, “and so we’re moving toward a return to normal.”

On the inflation front, Barkin said, “My gut feeling is that things are normalizing.” He added, “On the employment side, I think it’s harder to say.”