• Federal Reserve Bank of Richmond President Tom Barkin says inflation remains above the 2% target but is not expected to accelerate.
  • The central bank's current restrictive policy stance is seen as sufficient to continue guiding inflation lower.
  • Economic growth remains robust with a steady labor market, though uncertainty from potential tariff increases looms.

Federal Reserve Bank of Richmond President Tom Barkin stated Wednesday that while U.S. inflation remains above the central bank's 2% target, currently running around 2.4%, he does not expect it to accelerate further and believes the current policy stance should continue to guide it lower.

"We're in a good position," Barkin said during his remarks, pointing to the combination of still-restrictive interest rates and an economy that continues to show underlying strength. The federal funds rate currently sits in the 4.25-4.5% range following recent cuts, and the Fed has signaled only cautious further adjustments are likely this year.

The comments come amid a backdrop of solid economic growth, with GDP expanding 2.5% in 2024, and a labor market that remains steady despite some cooling. Unemployment sits near 4.1-4.3%, and job growth, while slower than earlier peaks, remains positive with employers adding 227,000 jobs in November.

Barkin acknowledged that recent policy changes have created uncertainty, with businesses and consumers exhibiting caution. The March Fed Beige Book recorded record mentions of "uncertainty" among contacts, reflecting concerns about potential tariff increases and fiscal policy shifts that could impact prices and growth.

When asked about the potential impact of new tariffs, Barkin noted that while the 2018 rounds had limited inflationary effects, current proposals could have a larger impact if implemented, particularly when paired with existing price pressures. "We're watching how businesses and consumers respond to these potential changes," he said.

The Richmond Fed president's assessment aligns with most of his colleagues who expect inflation to trend lower while growth remains positive. Fed forecasts currently suggest only two more rate cuts in 2025, though some officials have argued for greater caution or even pausing further reductions.

Barkin did not specify his preferred timing for future policy moves but emphasized the Fed's flexibility to adjust as new data emerges. "The path forward will depend on how the inflation data evolves in coming months," he said, while expressing confidence that current policy settings remain appropriately restrictive.

Correction: An earlier version of this article misstated the current federal funds rate range. It is 4.25-4.5%.