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The Federal Reserve’s top official has warned of the risk of resurgent US inflation since Donald Trump took office, even as he forecast stronger growth overall for the world’s largest economy.
Richmond Fed President Tom Barkin said Americans are still spending freely, job losses are low and U.S. consumers are starting to push the envelope.
But Barkin said that while this combination could provide “more upside in terms of growth” in 2025, he expects “a greater risk of inflation.”
“Wages and production costs may see pressure,” he said in a speech on Friday. If they have recent experience with inflation, cost savers may have more courage to pass on costs.
Barkin’s comments came just weeks before Trump returned to the US presidency promising to raise tariffs and cut taxes and regulations. He also promised to take action. Immigration And start a mass evacuation.
Some economists He warned That the policy agenda could trigger new inflation in the US.
Other Fed officials have also begun to account for Trump’s return in their assessments, with US central bank chairman Jay Powell including “highly conditional estimates of the economic effects of policies in his projections” last month.
Uncertainty about what Trump will actually do is clouding the outlook, but Barkin stressed that there could be “longer back and forth” as the final plans are drawn up.
If economic growth unexpectedly stalls, he said, “the damage could be mitigated by the ability to roll back some of these policies.”
of Federation Last month, it cut interest rates to 4.25-4.5 percent, while officials significantly lowered their expectations for rate cuts in 2025 and 2026, raising inflation sharply.
Most officials expect only a half-point rate this year, down from a full percentage point they penciled in in September.
Barkin said on Friday that the Fed is “well positioned no matter how the economy develops.”
“We have the tools to respond if employment declines or inflation re-emerges,” he said.
