Richmond Fed President: The Federal Reserve still needs time to assess the direction of the economy and inflation; interest rates may remain unchanged

According to the Zhitong Finance APP, Barkin, the president of the Federal Reserve Bank of Richmond, stated that the Federal Reserve needs more time to assess the direction of the U.S. economy and inflation, especially given the high uncertainty surrounding the policies of the Trump administration. This statement reinforced market expectations that the Federal Reserve will not adjust interest rates in the short term.

In an interview, Barkin expressed that his basic expectation for this year is that employment and consumption will remain stable, but corporate investment faces many unknown factors, leading to uncertainty in the economic outlook. He pointed out, "It is difficult to judge the true trends of economic growth, employment, and inflation until all these uncertainties are clarified further."

Recently, despite the Trump administration's aggressive measures in trade policy, several Federal Reserve officials have indicated that they are not in a hurry to adjust interest rates. Last weekend, Trump announced a 25% tariff on Canada and Mexico, but subsequently reached an agreement with the governments of both countries to delay implementation for at least a month. However, starting from midnight Tuesday, the U.S. imposed a 10% tariff on Chinese goods, and the Chinese government quickly took countermeasures. Faced with these variables, the Federal Reserve maintained interest rates last week, having cut rates three times in a row in the second half of 2024.

Barkin had previously stated that he expects inflation to gradually fall to the Federal Reserve's target of 2%, thus requiring policy to maintain a certain degree of tightening until this target is achieved. Data released last week showed that the Federal Reserve's preferred core inflation indicator remained sluggish in December 2024, with actual income growth being weak. Additionally, the U.S. Department of Labor will release the latest employment market data this Friday, which may further influence market expectations regarding the Federal Reserve's policy direction.

Barkin noted that despite the Federal Reserve having cut rates by 1 percentage point last year, the current interest rate level still falls within the "moderately tight" range. He believes that U.S. economic data remains robust. When asked whether he is considering raising interest rates, Barkin stated that he does not rule out any possibilities, but the current economic conditions do not support a rate hike.

He emphasized, "There is no reason to raise rates unless there are signs of overheating in the economy. But at present, I do not see any signs of economic overheating. On the contrary, I believe inflation is decreasing rather than increasing, and the employment market is stabilizing."