Fed President Predicts Economic Growth for 2025 Despite Policy Uncertainty

Richmond Fed President Thomas Barkin shared an optimistic outlook for the U.S. economy heading into 2025, highlighting potential growth despite uncertainties tied to the policies of the new Trump administration.

Speaking at the Maryland Bankers Association, Barkin emphasized the strength of the labor market and consumer spending as key drivers of economic resilience.

Barkin suggested that economic growth is more likely to exceed expectations rather than fall short, based on current trends. However, he acknowledged the potential for stronger hiring to contribute to inflationary pressures. He noted that the labor market appears poised to favor hiring over layoffs, signaling confidence in the economy’s forward momentum.

Financial markets, Barkin observed, have started adjusting to the Federal Reserve’s projections of a slower pace of rate cuts in 2025. He highlighted that long-term interest rates are stabilizing at levels lower than previously hoped but still reflective of cautious optimism.

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The Fed reduced its benchmark policy rate by a total of one percentage point during its final three meetings of 2024, including a quarter-point cut in December. Looking ahead, policymakers anticipate only a modest reduction of half a percentage point in 2025, citing lingering concerns over inflation and uncertainties surrounding the administration’s trade, tax, and immigration policies.

Although Barkin won’t cast a vote on interest rate decisions this year, his remarks align with the Federal Reserve’s broader stance, which balances optimism for economic growth with a watchful eye on inflation risks.

Kosta Gushterov