Richmond Federal Reserve President Thomas Barkin stated that he is not ready to alter his monetary policy outlook despite the unexpectedly weak U.S. jobs data released on Friday. This comes as Wall Street shifts towards anticipating aggressive interest rate cuts.
In an interview with Carolina Business Review, Barkin acknowledged the weaker-than-expected job growth in July but emphasized the importance of not prejudging upcoming meetings. “The job growth was weaker than what most professional forecasters had forecast,” he said. However, he refrained from providing any specific guidance on rate cuts, stating, “We’re going to get a lot of data between now and September. Two whole rounds of jobs reports, two whole rounds of inflation readings, a lot of activity metrics.”
Barkin’s remarks followed the Federal Reserve’s decision on Wednesday to keep its benchmark interest rate in the 5.25%-5.50% range while leaving the door open for a potential rate cut in September. This decision was influenced by a slowdown in inflation and a cooling job market. The Labor Department’s July employment report, which showed a smaller-than-expected gain of 114,000 jobs and an increase in the unemployment rate to 4.3%, added further complexity to the economic outlook.
In response to the weak jobs data, many economists have adjusted their forecasts to predict a more aggressive rate-cut path, with some suggesting a half-percentage-point reduction in borrowing costs rather than a quarter-percentage-point move next month. Some analysts even argued that the Fed should have cut rates at the recent meeting, given the easing inflation data.
Barkin dismissed the idea that the Fed made a mistake by not cutting rates, saying, “I always assume there will be an equal amount of criticism no matter what we do. And so if we had moved at the last meeting, we would’ve gotten an equal amount of criticism that said we moved too quickly.” He emphasized that the U.S. job market remains solid by most standards, noting that the rise in the unemployment rate in July was “pretty normal” historically and that the level of joblessness was still low.
“We’ve been through two years, two and a half years of very frothy labor markets,” Barkin said, “and so we’re headed back down toward normal.” On the inflation front, Barkin expressed a sense of normalization, though he noted uncertainty regarding employment trends. “My gut is that it’s normalizing,” he said about inflation. “On the employment side, I think it’s harder to know.”
In summary, Barkin’s comments highlight the Fed’s cautious approach as it awaits more comprehensive data before making any significant monetary policy decisions in September.
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