Richmond Fed President Thomas Barkin expressed a positive economic outlook for the United States, predicting growth through 2025 despite uncertainties surrounding the policies of the new Trump administration. Speaking at the Maryland Bankers Association, Barkin emphasized the resilience of the labor market and consumer spending as drivers of his optimism. He acknowledged that the resolution of economic policy uncertainties would be crucial but expected growth to be more bullish than bearish based on the current knowledge. However, Barkin cautioned that stronger hiring could pose inflation risks.
Barkin also mentioned that the labor market is likely to shift towards hiring rather than layoffs, reflecting confidence in the momentum of the economy in the new year. He highlighted the growing confidence in financial markets as investors adjust to the Federal Reserve’s outlook for a slower pace of rate cuts in 2025. Barkin stated that long-term interest rates are not expected to decrease as much as some had hoped.
The Federal Reserve has taken a cautious approach by gradually reducing its benchmark policy rate by a total of one percentage point in 2024, with a quarter-point cut in the December meeting. However, policymakers project a modest half-percentage-point cut in 2025 due to stalled inflation progress and uncertainties surrounding 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 align with the cautious optimism expressed by the broader central bank narrative regarding inflation risks.
*This is not investment advice.
