Richmond Fed President Thomas Barkin emphasized the importance of closely monitoring economic developments and inflation to determine the pace and size of future rate cuts. Barkin predicts another 50 basis point rate cut for the rest of the year.
Barkin Predicts Another 50 Basis Point Rate Cut for Rest of Year
In addition to discussing recent labor movements and geopolitical conflicts, Barkin highlighted the potential for these factors to increase inflation risks.
Barkin acknowledged the possibility of a “low hiring, low layoff” labor market scenario but also pointed out that an increase in demand could lead to a corresponding rise in labor demand. The Federal Reserve is carefully weighing the risks associated with demand versus supply concerns, with a particular focus on how low interest rates might impact home and auto sales.
According to Barkin, the median expectation among Federal Open Market Committee (FOMC) policymakers for the remainder of the year is a 0.5 percentage point rate cut, which would result in a slight decrease in interest rates. However, the Fed remains committed to its anti-inflation measures and does not anticipate a significant decline in core Personal Consumption Expenditures (PCE) until next year.
Barkin also noted that current interest rates do not align with the decrease in inflation and that the labor market is nearing sustainable levels. These factors justify the possibility of a 50 basis point rate cut in September.
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