Fed's Barkin Forecasts Positive Outlook for U.S. Economy Despite Policy Uncertainties

Investing.com -- According to Richmond Fed President Thomas Barkin, despite uncertainties about the impact of future policies that the Trump administration may implement, the U.S. economy is expected to grow rather than shrink by 2025.

Speaking to the Maryland Bankers Association on Friday, Barkin pointed out that inflation risks could be higher, especially if employment strengthens. He noted that both businesses and consumers are optimistic, leading him to believe that the job market is more likely to trend towards hiring rather than layoffs. Financial markets also appear to show greater confidence and less uncertainty, in line with predictions that the Federal Reserve's pace of interest rate cuts will slow next year.

Barkin, who will not vote on the Fed's interest rate policy this year, added that it is unlikely that long-term interest rates will decline as much as some hope. In December, the Federal Reserve lowered the benchmark policy rate by a quarter point. Over the last three meetings of 2024, the interest rate was reduced by a full percentage point.

However, due to the stalling of inflation progress and doubts about how future President Donald Trump's policies will impact the economy, policymakers forecast that the benchmark interest rate will only decrease by another half point this year.