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A senior official at the Federal Reserve (the US central bank) warned of the risk of a return of inflation in the United States after Donald Trump took power, even as he expected strong growth for the world's largest economy in general.
Tom Barkin, president of the Federal Reserve Bank of Richmond, said Americans were still spending freely, job losses remained low, and American consumers were beginning to resist rising prices.
But while this combination could deliver “more upside than downside in terms of growth” in 2025, Barkin said he also expects “more risks on the inflation side.”
“Wages and product costs may see pressure,” he said in a speech on Friday. “If they do, given recent experience with inflation, rate setters may have more courage to pass on costs.”
Barkin's comments come just weeks before Trump returns to the US presidency with his pledge to raise tariffs and cut taxes and regulations. He also pledged to take strict action against him Immigration Mass deportations begin.
Some economists I was warned That policy agenda could spark a new wave of inflation in the United States.
Other Fed officials have also begun to factor Trump's return into their forecasts, US central bank Chairman Jay Powell said last month, by including “highly conditional estimates of the economic impacts of policies in their forecasts.”
Barkin stressed that uncertainty about what Trump will actually do casts a cloud over the outlook, but assumed there could be an “extended period of backsliding” while final plans are made.
If economic growth falters unexpectedly, he said, “the damage could be lessened by potentially rolling back some of those policies.”
the Federal Reserve Bank Last month, he cut interest rates to 4.25% to 4.5%, while officials significantly reduced their estimates of interest rate cuts in 2025 and 2026 and sharply raised their inflation forecasts.
Most officials now expect cuts of just half a point this year, down from the full percentage point they expected in September.
Barkin said Friday that the Fed is “in a good position regardless of how the economy develops.”
“If employment rates falter or inflation resurfaces, we have the tools to respond,” he said.
