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Richmond Fed President Thomas Barkin struck an optimistic tone today, predicting a positive economic outlook for the United States through 2025 and indicating that growth is more likely to have upside potential despite ongoing uncertainties regarding the policies of the new Trump administration.
Speaking at the Maryland Bankers Association, Barkin said the resilience of the labor market and consumer spending were key drivers of his optimism. “How the economic policy uncertainty resolves will be important. But I expect growth to be more bullish than bearish, given what we know today,” he said. However, he cautioned that stronger hiring could pose risks on the inflation front.
Barkin said the labor market is more likely to shift toward hiring than layoffs, reflecting confidence in the economy’s momentum as we enter the new year. “The labor market looks set to shift toward hiring rather than layoffs,” he said.
Barkin also pointed to growing confidence in financial markets as investors adjust to the Fed’s outlook for a slower pace of rate cuts in 2025. Markets appear to have accepted that long-term interest rates “are not going to fall as much as some had hoped,” Barkin said.
The Fed has taken a cautious approach by cutting its benchmark policy rate by a total of one percentage point at its final three meetings in 2024. The rate was cut by a quarter point at the December meeting. But policymakers are projecting a modest cut of only half a percentage point in 2025, citing stalled inflation progress and uncertainties over the new administration’s trade, tax and immigration policies.
While Barkin won’t have a vote on the Fed’s interest rate policy this year, his comments are consistent with the broader central bank narrative: cautious optimism about inflation risks.
*This is not investment advice.