Federal Reserve Governor Thomas Barkin stated on Tuesday that he hopes upcoming data and ongoing community interviews will help clarify the economic outlook. Currently, Fed policymakers remain divided over whether inflation or employment goals face greater risks, with disagreements persisting on the direction of monetary policy.
Barkin, in prepared remarks for an event in Virginia and during media interviews, noted that existing data and community feedback suggest the economy is in an "undesirable" equilibrium. Inflation remains above the Fed's 2% target without showing clear upward or downward momentum, while unemployment may rise but not significantly.
Fed officials are split between cutting rates to protect the labor market or holding steady to prevent inflation from accelerating. Barkin remarked that it’s easy to "imagine scenarios justifying policy action in either direction—but also scenarios justifying no action."
"I don’t think we’re close to our targets on either variable. That said, I don’t see large downside risks either," Barkin said. "We’re not in a ‘panic mode’ situation on either front."
Although Barkin lacks a vote on the Federal Open Market Committee (FOMC) this year, his stance reflects a middle ground between two camps: one advocating rate cuts to counter slowing growth and rising unemployment, and another warning of persistent inflation risks opposing further easing.
Investors see near-even odds—around 50% each—for either a 25-basis-point rate cut or a pause at the December 9-10 meeting, with dissent likely in either scenario.
**Dual Pressures on Goals** Barkin suggested that as U.S. government data releases resume post-shutdown, they may help policymakers reach consensus. Recent conflicting signals have clouded the economic picture.
In prepared remarks for Shenandoah University’s economic summit, he noted: "Broadly, we see pressure on both policy goals—inflation above target and slowing job growth." However, he added, "we also see moderating pressures in both areas," citing consumer pushback on price hikes and stable unemployment due to tighter labor supply.
Credit card data and corporate earnings indicate healthy growth, Barkin said, though certain sectors and households face strain. While the job market appears balanced overall, deeper scrutiny reveals imbalances at the firm level.
"Outside skilled trades, labor supply seems ample, with many qualified applicants per opening. But layoffs at firms like Amazon, Verizon, and Target warrant caution," he noted.
Barkin likened the Fed’s current position to "navigating a ship at night without a lighthouse—unsettling." He expressed hope for clarity once official data resumes: "Between now and then, there’s much to learn."
He also highlighted that lower mortgage rates may boost housing demand but won’t resolve the core supply issues driving high home prices.
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