Richmond Fed President Barkin is usually a good barometer on where the core of the FOMC stands.
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Rate cuts so far have helped insure health of job market while Fed completes “last mile” of returning inflation to target.
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Economy remains “remarkably resilient.”
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Given growth, low unemployment rate, hard to imagine either businesses or consumers moving to the sidelines.
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Rise in productivity suggests firms can bear higher input costs without pressure to raise prices.
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Firms say demand is fine and are not doing layoffs “at scale.”
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“Significant stimulus” arriving in the form of deregulation, tax and withholding changes.
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Inflation remains above target, expect more progress.
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Both job growth and spending have been narrowly focused in the economy.
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Sustained inflation miss since 2021 should be taken seriously, can influence inflation in the future.
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Slow growth in labor supply, given declining immigration and low fertility rates, is a top long-term concern.
The ‘significant stimulus’ arriving line is the most-notable for me, as it argues for keeping rates where they are as that’s digested. We saw a big jump in the ISM manufacturing survey yesterday and it was combined with transports and real-economy stocks surging. Could there be a turn in that part of the economy already?
Barkin will speak in a Q&A following the delivery of these comments so that should give us a better idea of where he sees rates heading. At the moment, the Fed funds futures curve is pricing in 48 bps of easing this year, which has been steady for the past week or so through the Warsh decision.
I will update with comments in the Q&A:
