By Michael S. Derby
NEW YORK (Reuters) - Federal Reserve Bank of Richmond President Thomas Barkin said Friday that softer jobs data is moving in the direction desired by central bankers trying to lower inflation, but added he was not yet ready to say what must happen next with the Fed's monetary policy settings.
"I'm not going to prejudge, I value the optionality of seeing what we're going to see in the data and in particular, we're going to get two inflation reports between now and the next meeting, and I think that's what's going to matter to me," Barkin said in an interview on CNBC.
"We've got a lot of time" before having to decide whether to hike rates again or to continue holding steady on the short-term rate target, he said.
Barkin was the first central bank official to weigh in after this week’s Federal Open Market Committee gathering and the release of the October jobs data. On Wednesday the FOMC kept its interest rate target steady at between 5.25% and 5.5% and kept alive the possibility of more increases to bring inflation back to the 2% target.
The jobs data Friday suggested the Fed need not rush to hike rates again, with job gains cooling to a 150,000 gain as wage gains moderated and the unemployment rate ticked up slightly to 3.9% from September’s 3.8%.
"There's been this disconnect between the data we're seeing and what I'm hearing on the ground," which shows the job market moving into better balance, Barkin said. He said the October hiring data "was welcomed to see that the gradual lessening that we've been expecting is continuing."
One factor allowing the Fed to keep rates steady this week has been a tightening in financial conditions led by a surge in bond yields that has boosted real world borrowing costs.
But since the Fed met, yields have moved sharply lower. In his television interview, Barkin was not ready to say what that means for monetary policy.
"I'd like to think the markets responded to the data," Barkin said of the drop in yields. "What we saw today was data that showed a gradual lessening of the job market," he said, adding "I think that's what those who would like to not see another rate hike would want to see" and that's why market prices have moved as they have.
Barkin also cautioned limited Fed power on longer term market prices. "As financial conditions are affecting the economy in a direction that takes us the right way, that helps, but it's not really a policy variable, they’re pretty volatile, we don't control them," he said.