Richmond Federal Reserve Bank President Tom Barkin said the monetary policy outlook remains in a fragile balance given the conflicting pressures of rising unemployment and persistently high inflation.

Last year's 75 basis point policy easing means interest rates are now within the estimated range for the so-called neutral rate, Barkin said, which he likened to taking out insurance.

"But going forward, policy will require very careful assessments that balance progress on each side of our mandate," Barkin said in prepared remarks for an event hosted by the Raleigh Chamber of Commerce on Tuesday.

Fed officials remain divided on how much to lower interest rates this year after cutting them by three-quarters of a percentage point over their last three meetings. A growing number favor keeping rates unchanged at least until they have more data on inflation and employment.

In forecasts for 2026, the median projection from policymakers is for a quarter-point cut. Investors expect at least two.

Although the unemployment rate remains low by historical standards, Barkin said policymakers are looking at both sides of their dual mandate, hoping to boost employment while controlling inflation.

"With low hiring, no one wants the labor market to deteriorate further; with inflation now above target for almost five years, no one wants higher inflation expectations to be embedded. It's a delicate balance," Barkin said.

The Richmond chief expects tax cuts and deregulation to boost growth this year, while the resumption of official data since the government shutdown ended means policymakers will have a clearer picture of the economy in the coming months.

"I look forward to studying and understanding the clean data that starts to come in in the coming weeks," he said. (alg)

Source: Bloomberg