The Federal Reserve Bank of Richmond President, Tom Barkin, addressed the current economic situation at the 2024 UNCW Economic Outlook Conference in Wilmington, N.C. During his speech, he discussed recent decisions by the Federal Open Market Committee (FOMC) and their implications for inflation and economic growth.
Barkin noted that the FOMC had reduced the federal funds rate by 50 basis points in September due to progress on inflation. He highlighted that "twelve-month headline PCE inflation is now 2.2 percent," significantly lower than its peak of 7.1 percent in June 2022. This decline is attributed to consumer behavior changes in response to high prices.
Despite this positive trend, Barkin cautioned against declaring victory over inflation too soon. He pointed out that while rates have been adjusted to a less restrictive stance, there is still work to be done as "inflation remains above our 2 percent target."
Economic activity has remained robust, with GDP growth at 3 percent in the second quarter and consumer spending rising at an annualized rate of 3.1 percent over the last two months. The labor market also shows resilience with low unemployment rates and steady job gains.
Barkin emphasized that while some might welcome rate cuts, "our focus has never been on the rates themselves but on inflation." He explained that high rates are used as a tool to control inflation with minimal collateral damage.
He concluded by addressing uncertainties surrounding both inflation and employment: "Victory means different things to different people...there remains significant uncertainty on both inflation and employment." Barkin expressed a commitment to attentively navigating these challenges through ongoing dialogue and learning from developments.
