Fed officials Thomas Barkin and John Williams recently shared their views on the U.S. economy, inflation, and the impact of the new Trump administration's policies. In their statements, they express optimism about economic fundamentals but note that the government's next steps need to be clarified.
Speaking about the broader economic outlook, Thomas Barkin noted that pricing behavior among companies is returning to pre-COVID-19 patterns. Encouragingly, the labor market appears to have stabilized, with the December unemployment rate providing further positive momentum. “There’s not much evidence to support the claim that the economy is weakening. Demand is strong, but it’s not booming,” Barkin said.
On inflation, Barkin offered reassurance that price pressures were easing, noting that the Fed was on track to return toward its 2% target. “We can see potential paths for inflation to remain stable or continue to move toward our target,” he said.
Barkin also touched on interest rates, noting that current long-term interest rates are consistent with levels seen in the early 2000s, a period characterized by minimal restrictions on business activity. He confirmed that there have been no recent changes in long-term interest rates that would require adjustments in Fed policy.
Both Barkin and Williams expressed concern about the lack of detailed policy direction from President-elect Donald Trump’s administration. While Barkin acknowledged that the general direction on issues such as tariffs is beginning to become clear, specific details remain elusive.
Williams echoed that sentiment, noting that uncertainty about government policy was holding back some trade developments. “The Fed is currently in a wait-and-see mode to see what our elected officials do on policy,” he said.
Williams shared additional insights into key economic factors:
- Inflation: He noted that some of the decline in inflation was due to factors outside the US and that the trend showed a broad base.
- Housing Market: Demand for housing remains strong, contributing to overall economic stability.
- Neutral Interest Rate: Williams suggested that higher public debt could affect the neutral interest rate, but that it is not currently a major factor in monetary policy decisions.
*This is not investment advice.
