Fed's Barkin says bond yields remain reasonable despite recent rise

Investing.com -- Richmond Federal Reserve President Thomas Barkin said Thursday that the recent increase in U.S. Treasury bond yields does not appear to reflect growing worries about inflation or government deficits, and borrowing costs remain within a reasonable range.

"I don't mark it up to inflation expectations," Barkin said, adding that debt auctions have been successful despite rising Treasury supply to fund deficits and reduced purchases from major buyers like China. He said rates "are not out of the zone of reasonableness."

Barkin noted that longer-term bond market-based inflation expectations do not appear to have broken out. He said he wonders whether the balance between supply and demand in the long-term Treasury market has shifted given the amount of U.S. supply.

On employment, Barkin said he takes encouragement from recent job growth but noted it is not difficult to imagine possible job losses due to artificial intelligence. He said employers outside of software are not yet reducing headcount due to AI, though he finds it hard to reach conclusions on short-term versus long-term effects of the technology.

Barkin said he is nervous about risks on both sides of the Federal Reserve's dual mandate of stable prices and maximum employment. He said he is not leaning towards overly focusing on risks to inflation or employment, and does not feel now is a time for strong forward guidance.

The Fed official also said businesses today are much less confident about their ability to raise consumer prices to recoup costs. He said he spoke with Fed nominee Kevin Warsh on Tuesday just to get acquainted and trusts him as a leader.

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