Richmond Fed President Tom Barkin addressed business leaders in Baltimore, discussing the economic uncertainty stemming from President-elect Trump’s return to office.
A top Federal Reserve official has warned of potential inflationary pressures linked to President-elect Donald Trump’s January return to the White House.
Speaking Friday to Maryland business leaders, Richmond Fed President Tom Barkin acknowledged the possibility of robust economic growth but cautioned about rising inflation, particularly if wages and hiring increase significantly.
Barkin cited positive economic indicators such as strong consumer spending, low unemployment, and steady wage growth. However, he also noted emerging consumer resistance to rising prices, suggesting a possible inflection point in inflation trends.
“The impact of economic policy uncertainty remains to be seen. However, based on current information, I anticipate greater upside potential for growth than downside,” Barkin stated. He added that there could be “increased risk regarding inflation,” especially with a strengthening labor market.
Despite Trump’s pledge to curb inflation, economists are concerned that his proposed tariffs and immigration policies could trigger a surge in inflation.
Immigration has been a crucial factor in recent labor force and job growth. In November, Trump threatened to impose 25% tariffs on all goods imported from Mexico and Canada—a move potentially contradicting his campaign promise to lower prices. The US is the world’s largest importer, with Mexico, China, and Canada its top three suppliers, according to recent US Census Bureau data.
Before the election, roughly seven in ten voters expressed significant concern about food prices, according to AP VoteCast. During a September Pennsylvania grocery store visit, Trump promised consumers price reductions.
Barkin pointed out that proposed tariff increases introduce substantial uncertainty, with some analysts warning that these policies could fuel inflation by raising costs for businesses and consumers.
The Federal Reserve has already adjusted its policy outlook in anticipation of Trump’s return. Fed Chair Jerome Powell recently indicated that officials are incorporating preliminary assessments of the economic effects of Trump’s agenda.
Last month, the central bank lowered its benchmark interest rate to 4.25-4.50%, while moderating its projections for rate cuts in 2025, reflecting concerns about inflationary risks.