Fed’s Barkin: Soft landing within reach, but not assured

Richmond Fed Thomas Barkin, in his prepared remarks for a speech, acknowledged that soft landing is “increasingly conceivable. But he also cautioned that such an outcome is “in no way inevitable.”

Barkin outlined four key risks that could potentially derail the US economy from its desired path. Firstly, he expressed concern that the economy might “run out of fuel”, implying a slowdown in economic momentum. Secondly, he pointed to the possibility of “unexpected turbulence”.

Thirdly, the risk that inflation might stabilize at a level above Fed’s 2% target. Finally, Barkin mentioned the risk of a delayed “landing”, suggesting that the economy could continue to perform better than expected, which might prolong the process of policy normalization.

Addressing the approach to monetary policy, Barkin emphasized the importance of incoming data in shaping the Fed’s decisions. He stated, “Is inflation continuing its descent and is the broader economy continuing to fly smoothly? Conviction on both questions will determine the pace and timing of any changes in rates. There’s no autopilot. The data that come in this year will matter.”

Full remarks of Fed’s Barkin here.