MNI BRIEF: Barr Sees Inflation Coming Down To Fed Target

Federal Reserve Governor Michael Barr on Thursday said the outlook is clouded by President Donald Trump's tariff policies, but inflation is continuing on a path to the central bank's target. 

"In my view, the economy is on solid footing, with solid growth, low and stable unemployment, and inflation continuing to come down towards our 2% target," Barr said in opening remarks for a Northeast/Mid-Atlantic Small Business Credit Symposium. "But the outlook has been clouded by trade policies that have led to an increase in uncertainty, contributing to declines in measures of consumer and business sentiment." (See: MNI INTERVIEW: Fed Could Hold Rates For Some Time-Kaplan)

Potential disruptions to supply chains and distribution networks are particularly acute for small businesses, which are less diversified, less able to access credit, and hence more vulnerable to adverse shocks, he said in prepared remarks. "Small businesses play a vital role in production networks, often providing specialized inputs that can’t easily be sourced elsewhere, and business failures could further disrupt supply chains."

"As we saw during the pandemic, such disruptions can have large and lasting effects on prices, as well as output. If these disruptions were to occur, we’d likely see lower growth and higher inflation ahead," Barr said. (See: MNI INTERVIEW: Fed On Hold Until At Least December - Lacker)