Fed official: People ‘hate’ inflation. That trumps bank stress and job loss

New York
CNN
 — 

The Federal Reserve faced a particularly vexing decision this week: Should it raise interest rates during a bank crisis?

For Tom Barkin, the decision wasn’t especially challenging. Inflation, he says, remains public enemy No. 1.

“Inflation is high. Demand hadn’t seemed to come down. And so, the case for raising was pretty clear,” Barkin, the president of the Federal Reserve Bank of Richmond, told CNN in an exclusive interview on Friday.

Barkin, who participates in the Fed’s debate but doesn’t have a vote this year, conceded that every decision is “hard” and fully debated.

But the economic reports heading into this week’s Fed meeting suggest the economy remains too hot. The Fed ultimately reached a unanimous decision to raise interest rates for the ninth meeting in a row.

“The labor market is tight. Historically tight,” Barkin said. “Inflation, unfortunately, has stayed too high.”

Some experts, including former FDIC Chair Sheila Bair and Moody’s Analytics Chief Economist Mark Zandi, urged the Fed not to exacerbate turmoil in the banking system by raising interest rates following the failures of Silicon Valley Bank and Signature Bank.

“For me, the question was: Do you see such stresses happening that you felt like you really had to pull back and learn more?” said Barkin. “It felt very stable by the time we got there. So, the conditions were right to do monetary policy the way we want to do monetary policy.”

Some politicians, on the left and right, have blasted the Fed for raising rates so rapidly that mass layoffs could ensue.

Massachusetts Democratic Sen. Elizabeth Warren told CNN’s Jake Tapper on Wednesday that Fed Chair Jerome Powell is doing a “really terrible job” and is “trying to get two million people laid off.”

Asked about the argument from politicians that the Fed wants people to lose jobs, Barkin stressed that the public is very upset with the high cost of living.

“The one thing that I hear loud and clear from everybody is that they hate inflation. They find inflation to be unfair,” Barkin said, referring to talking to residents in his Fed district. “You get a raise and then you have to spend that raise at the gas station. That creates uncertainty. It’s…