Richmond FED President Thomas Barkin Speaks About the US Economy!

Richmond FED President Thomas Barkin spoke in an optimistic tone today, predicting a positive economic outlook for the United States in 2025 and stating that growth is more prone to upward potential despite the ongoing uncertainties regarding the policies of the new Trump administration.

Speaking at the Maryland Bankers Association, Barkin said the resilience of the labor market and consumer spending are key drivers of his optimism. “How economic policy uncertainty is resolved will be important. “However, with what we know today, I expect growth to be more upside than downside,” he said. However, he warned that stronger hiring could pose risks on the inflation front.

Barkin said businesses remain optimistic and consumers continue to spend, making it more likely that the labor market will turn to hiring rather than layoffs. As a reflection of the confidence in the momentum of the economy as we enter the new year, he said, “The employment market seems to be shifting towards hiring rather than layoffs.”

Barkin also cited growing confidence in financial markets as investors adjust to the Fed’s outlook for a slower pace of interest rate cuts in 2025. Markets appear to have accepted that long-term interest rates “will not fall as much as some had hoped,” Barkin said.

The FED adopted a cautious approach by reducing the benchmark policy rate by a total of one point in the last three meetings of 2024. At the December meeting, the interest rate was reduced by a quarter point. But policymakers are forecasting only a modest decline of half a percentage point in 2025, citing stalled progress in inflation and uncertainties about the new administration’s trade, tax and immigration policies.

Although Barkin does not have a vote on the Fed’s interest rate policy this year, his comments are in line with the broader central bank narrative: cautious optimism over inflation risks.

*This is not investment advice.