Richmond Fed President Thomas Barkin expressed optimism about the progress on inflation on Thursday, but noted that the fight is not over, citing potential risks that could trigger price pressures.

Speaking at an event in Norfolk, Virginia, hosted by the Virginia Maritime Association, Barkin said, "We are definitely moving in the right direction. (But) I'm not going to declare victory."

When asked about factors that could lead to sticky inflation, Barkin mentioned conflicts in the Middle East and the possibility that housing demand could outpace supply as the Federal Reserve lowers interest rates.

However, he added, "I don't want to let the possibility of what might happen overshadow the fact that we've actually made a lot of progress on inflation."

Recent data has shown the economy to be resilient as overall price pressures ease. However, the latest data released on Thursday showed that underlying inflation in September rose more than expected. Barkin said he is still studying the newly released data but noted that some aspects of the report are encouraging, such as a slowdown in housing costs this month.

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The inflation data comes after the labor market performed stronger than expected in September, with data showing active hiring leading to a decrease in the unemployment rate. This eased concerns about the Federal Reserve being slow to act on potential risks in the labor market. The labor market has cooled in recent months but remains generally robust.

Barkin said he believes the employment report reflects cooling wage growth, but employers are reluctant to lay off workers.

He noted, "What I see in the employment report confirms what I hear. We are in an environment of low hiring and low firing."

Barkin added that the robust growth in wages during the pandemic recovery was accompanied by increased productivity. He said this means that "unit labor costs have not created inflationary pressures."

It is understood that Barkin voted in favor of the Federal Reserve's rate cut last month, when officials lowered the key policy rate by 50 basis points to a range of 4.75-5%. Barkin described the move as "realigning towards a less restrictive policy stance.""I don't care whether you take three steps or four, two steps or one," Barkin said, "There are many ways to solve a problem."

Federal Reserve officials will announce their next interest rate decision after the meeting on November 6th and 7th. Futures markets indicate that investors have withdrawn bets on policymakers making another significant rate cut at that meeting, currently expecting a cut of about 25 basis points.

Investors anticipate that by the end of 2024, the Federal Reserve will cut rates by another 50 basis points, which is in line with the median forecast released by Federal Reserve officials in September.