Fed's Barkin is saying:
- Wants further evidence that inflation is settling back to target
- Economy operating just fine current level of rates
- He's reassured by what he's seeing in the banking sector
- Never want to declare victory on potential bank strain
The Fed playbook is to raise rates by 25 basis points at the May meeting. That is where the playbook may diverge as some see inflation still too high. We did see on Friday the Michigan one year inflation expectations move up to 4.6% from 3.8% last month. CPI inflation did tumble from 6% to 5%, but it is still at 5% and shelter costs remain elevated. On the positive side is the long-awaited decline in shelter is expected to start to make its way into the economy. In addition, bank loans are expected to decline in the economy is expected to slow in the second half of the year which should also be a headwind toward lower inflation.
