Richmond Fed President Thomas Barkin said it is important to closely monitor economic developments and inflation to determine the pace and size of future rate cuts.

Barkin Predicts Another 50 Basis Point Rate Cut for Rest of Year

Barkin also touched on recent labor movements and geopolitical conflicts, and expressed the potential for these to increase inflation risks.

Barkin acknowledged the possibility of a “low hiring, low layoff” labor market, but noted that if demand picks up, there could be a corresponding increase in labor demand. The Fed is weighing whether demand risks will outweigh supply concerns, particularly focusing on how low interest rates could affect home and auto sales.

Barkin noted that the median expectation among FOMC policymakers for the rest of the year is a 0.5 percentage point rate cut, which would slightly lower interest rates. However, the Fed is not ready to end its anti-inflation measures and does not expect core Personal Consumption Expenditures (PCE) to fall significantly until next year.

Barkin said current interest rates are not consistent with the decline in inflation and that the labor market is close to sustainable levels, justifying a possible 50 basis point rate cut in September.

*This is not investment advice.