Fed’s Barkin avoids prejudging December decision, cites vulnerability to cost shocks

Richmond Fed President Tom Barkin told the Financial Times he would not “prejudge” the rate decision at the December meeting. He acknowledged the dual challenges of elevated inflation and labor market strains.

“If you’ve got inflation staying above our target, that makes the case to be careful about reducing rates,” he said. “If you’ve got unemployment accelerating, that makes the case to be more forward-leaning.”

Barkin emphasized growing vulnerability to cost shocks which he said was higher than it might have been five years ago. He also pointed to business concerns over potential inflationary pressures stemming from President-elect Donald Trump’s proposed tariffs and deportation policies

However, he added that Trump’s plans to boost domestic energy production could have a counteracting “disinflationary” effect.

While businesses are apprehensive about economic policy changes under the new administration, Barkin underscored that the Fed would not preemptively adjust its policy.

“We shouldn’t try to solve it before it happens,” he remarked.