MNI BRIEF: Fed's Barkin - Rates Near Neutral, In Delicate Spot

Three "insurance" interest rate cuts last year have left monetary policy within the range of the Federal Reserve's estimates of neutral and further moves will carefully balance both labor market and inflation goals, Richmond Fed President Tom Barkin said Tuesday. 

"As the labor market has softened in the past year, the FOMC cut rates further in the fall and to a level now within the range of its estimates of neutral. Think of it as taking out a bit of insurance. But going forward, policy will require finely tuned judgments balancing progress on each side of our mandate," he said in remarks prepared for the Raleigh Chamber of Commerce in Raleigh, N.C. 

"With the hiring rate low, no one wants the labor market to deteriorate much further; with inflation above target now for almost five years, no one wants higher inflation expectations to get embedded. It’s a delicate balance." (See: MNI INTERVIEW: Fed’s Miran Sees Substantial Rate Cuts In 2026)

The U.S. economy has proven "remarkably resilient" through gyrations in government policies and other changes, and the uncertainty that pervaded last year is "bound to diminish," a positive for hiring and investment. Also fiscal stimulus and deregulatory initiatives are rolling out this year, and the impact of the 175 bps in rate cuts in the last 16 months should flow into the economy, he said. "The fog should lift."