(Bloomberg) -- Federal Reserve Bank of Richmond President Thomas Barkin said he expects high interest rates to slow the economy further and cool inflation to the central bank’s 2% target.

Barkin, who votes on monetary policy this year, said Monday the strength of the labor market offers the Fed time to gain confidence that inflation is moving sustainably lower before lowering borrowing costs. But he added there’s a risk continued housing and services inflation will keep price gains elevated — as seen this year.

“I am optimistic that today’s restrictive level of rates can take the edge off demand in order to bring inflation back to our target,” Barkin said in prepared remarks to the Columbia Rotary Club in South Carolina. “The full impact of higher rates is yet to come.”

US central bankers left their benchmark rate unchanged last week at a more than two-decade high, where it’s been since July of last year. Following the decision, Fed Chair Jerome Powell said recent inflation data hasn’t given the committee more confidence that price increases are slowing to 2%. He did not share when he thought the central bank would reduce rates.

The Richmond Fed president said sellers are still trying to raise prices, and will do so until customers push back strongly.  

“The risk is that as we get less help from the goods sector, continued shelter and services inflation will leave the overall index higher than our target,” Barkin said. “That’s what we’ve seen so far this year.”

The Fed’s preferred inflation index rose 2.7% in March from a year earlier, a pickup from the 2.5% seen in February. Barkin called the early-2024 inflation figures “disappointing.”

The labor market has remained resilient, though is showing signs of moderating. US employers scaled back hiring in April, and the unemployment rate unexpectedly rose. Nonfarm payrolls advanced 175,000 last month, the smallest gain in six months, a Bureau of Labor Statistics report showed Friday.

Read More: On the Road With Richmond Fed President Barkin

Barkin told reporters after his speech he was more worried about the risk that inflation runs too high for too long than about the economy unduly weakening.

“I still have the weight going toward inflation and I think you can afford to do that when the jobs market appears as robust as it continues to be,” he said.

Barkin told reporters he believed the current interest rate is high enough to eventually bring inflation back to the Fed’s goal.

“I’m certainly hopeful,” he said, while adding estimates of the neutral interest rate have moved up. “I’m still operating with a hypothesis that this would be sufficiently restrictive, but time will tell.”

(Updates with additional Barkin comments in ninth paragraph.)

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