In an interview Thursday with The Associated Press, Tom Barkin also said the economy is showing “impressive strength,” highlighting recent solid reports on retail sales, unemployment claims, and growth in the April-June quarter, which reached a healthy 3%.

“With inflation and unemployment being so close to normal levels, it’s okay to dial back the level of restraint, somewhat,” Barkin said, referring to cuts to the Fed’s key interest rate. “I’m not yet ready to declare victory on inflation. And so I wouldn’t dial it back all the way” to a level that no longer restricts the economy, which economists refer to as “neutral.” Estimates of neutral are currently about 3% to 3.5%, much lower than the benchmark rate’s current level of 4.8%.

Barkin’s caution stands in contrast to some of his fellow Fed policymakers who have expressed more urgency about rate cuts. Fed Governor Adriana Kugler on Wednesday said she “strongly supported” the Fed’s larger-than-usual half-point rate cut last week, from a two-decade high of 5.3%, and added that she would support “additional cuts” as long as inflation continues to decline.

And Austan Goolsbee, president of the Fed’s Chicago branch, said Monday that there would likely be “many more rate cuts over the next year.”

Barkin was one of 11 Fed policymakers who voted for the Fed’s rate cut, while Governor Michelle Bowman dissented in favor of a smaller quarter-point reduction.

In the interview, Barkin said a key factor in his support was the relatively modest path of rate reductions the Fed forecast for the rest of this year and through 2025 in a set of projections it released Sept. 18. Those projections showed just two quarter-point reductions later this year and four next year, less than many investors and economists had expected.

Those projections showed a “very measured” series of rate cuts, as well as a “reasonably positive view” on the economy, Barkin said, and helped counter any perception that the Fed’s sharp rate cut this month reflected “panic” about the economy.

Barkin said inflation is likely to keep fading in the near term but he does see some risk it could prove stubborn next year. Conflict in the Middle East could push up oil prices, which would lift inflation, and lower interest rates might accelerate purchases of homes and cars, which would increase prices if supply doesn’t keep up.

“Inflation is still over target,” Barkin said. “We do need to stay attentive to that.”

Barkin said he sees the Fed cutting borrowing costs in two phases, beginning with a “recalibration” because rates are higher than needed given the drop in inflation in the past two years. Inflation has fallen sharply from a peak of 7% in 2022, according to the Fed’s preferred gauge, to about 2.2% in August.

But only if inflation continues to decline steadily next year would he support rate “normalization,” in which the Fed could cut its rate to the “neutral” level, Barkin said.

Barkin also spends considerable time discussing the economy with businesses in the Fed’s Richmond district, which includes Maryland, Virginia, North Carolina, South Carolina, the District of Columbia and most of West Virginia. Most of his recent conversations have been reassuring, he said. While hiring has clearly slowed, so far the companies he speaks with aren’t planning job cuts.

“I push them very hard,” he said. “I have a very hard time finding anybody doing layoffs or even planning layoffs.”

“Part of it is their business is still healthy,” he added. “Why would you do layoffs if your business is still healthy? Part of it is, having been short in the pandemic, they’re reluctant to get caught short again.”