The Federal Reserve's "cautious easing" camp adds a new member as Barkin emphasizes that a "soft landing" is still under control
Federal Reserve FOMC voting member and Richmond Fed President Tom Barkin stated that although the unemployment rate and inflation deviate from targets, the risk of further deterioration is limited. He emphasized that the current focus should be on achieving a "soft landing" for the economy and balancing inflation with unemployment. Barkin believes that a "rapid rate cut" in a dovish policy is not imminent, and with the implementation of tariff policies and strong consumer spending, the uncertainty surrounding the economic outlook is diminishing
According to the Zhitong Finance APP, Tom Barkin, the President of the Richmond Federal Reserve and a voting member of the Federal Open Market Committee (FOMC) in 2027, stated in a media interview on Friday that although the unemployment rate and inflation have deviated from the Federal Reserve's monetary policy targets to some extent, he believes the risks of further deterioration in both are limited. This also highlights his view that the "accelerated rate cuts" advocated by some dovish policymakers are not imminent, choosing to align with the "cautious rate cut" camp of the FOMC, which includes hawkish members.
"We are now very focused on trying to land this plane smoothly and balancing inflation and unemployment, which is what we are focusing on for a 'soft landing' of the U.S. economy. A soft landing is still within sight," Barkin said in an interview on Friday. "Both have moved in the wrong direction — but on the other hand, the downside risks are very limited, and we just need to adjust our stance as we learn more."
Last week, Federal Reserve officials voted to lower the benchmark interest rate by 25 basis points in response to growing market concerns about a slowdown in the U.S. non-farm labor market. Prior to this, they had kept rates unchanged in the long term for 2025 to assess the inflation risks brought about by the tariff policies led by U.S. President Donald Trump.
The economic data forecasts released after last week's Federal Reserve monetary policy decision, along with subsequent public comments, showed significant internal divisions among FOMC policymakers: one side wants to continue cutting rates at the upcoming meeting to guard against employment risks, while the other remains more concerned about potential inflation.
Barkin, who does not have a vote in this year's Federal Open Market Committee on setting interest rates, stated that as tariff policies take effect and consumer spending remains strong, the uncertainties that had clouded the U.S. economic outlook earlier this year have begun to dissipate from American businesses.
Austan Goolsbee, the President of the Chicago Federal Reserve, who has long favored a dovish monetary policy stance, stated on Tuesday Eastern Time that given inflation remains above the Federal Reserve's target and shows an upward trajectory, the Federal Reserve should maintain a cautious stance on further rate cuts rather than taking an aggressive path.
Around the same time, Federal Reserve Governor Michelle Bowman indicated that given the rapid weakening of the U.S. non-farm labor market, FOMC policymakers risk falling behind the economic situation and need to take decisive action to lower rates. Their latest remarks convey a similar message to the dot plot released last week, highlighting significant internal divisions within the Federal Reserve regarding the outlook for interest rates.
The Federal Reserve's first rate cut in nine months, both in magnitude and timing, undoubtedly aligns with market expectations. The dot plot, which is the focus of the market, indicates that the median value of interest rate forecasts suggests the Federal Reserve will cut rates three times this year, an increase from the previous dot plot, with an additional cut expected next year.
However, the specific forecast data in the dot plot indicates that future Federal Reserve rate decisions may lead to greater divisions: among the 19 Federal Reserve officials, 7 expect no further rate cuts this year, while another 2 only support one more cut. In other words, if not for the low expectations of the newly appointed Federal Reserve Governor nominated by Trump, the average would not be dragged down so low, making it essentially a tie whether the "dot plot" will indicate one or two more cuts this year based on the median outcome Most Federal Reserve officials believe that given the current outlook of robust U.S. economic vitality (even with a slight slowdown), there is no need for further significant interest rate cuts next year
