Richmond FED President Thomas Barkin Spoke About the US Economy!

Richmond FED President Thomas Barkin spoke optimistically today, predicting a positive economic outlook for the US in 2025, and stating that despite ongoing uncertainties about the new Trump administration's policies, growth is more inclined to upward potential.

Barkin, speaking at the Maryland Bankers Association, said that the resilience of the labor market and consumer spending are key factors in optimism. "How the economic policy uncertainty will be resolved will be important. However, with what we know today, I expect a development from bottom to top in terms of growth," he said. However, he warned that stronger hiring could pose risks on the inflation front.

Barkin, stating that businesses maintain their optimism and consumers continue to spend, said that the likelihood of the labor market turning towards hiring rather than layoffs is higher. As a reflection of the confidence in the momentum of the economy entering the new year, he said, "The employment market seems to be shifting towards hiring rather than layoffs."

Barkin also signaled increasing confidence in the financial markets as investors adapt to the Fed's outlook for a slower pace of interest rate cuts in 2025. Barkin noted that markets seem to acknowledge that long-term interest rates will not drop as much as some had hoped.

In the last three meetings of 2024, the FED adopted a cautious approach by lowering the benchmark interest rate by a total of one point. The interest rate was lowered by a quarter point in the December meeting. However, policymakers foresee a modest half-point decrease in 2025, citing the halt in progress in inflation and uncertainties related to the new administration's trade, tax, and immigration policies.

Although Barkin does not have voting rights in the Fed's interest rate policy this year, his statements are in line with a broader central bank narrative: cautious optimism against inflation risks.