Fed's Richmond President Barkin Urges No Rate Cut Amid Tariff Risks

Richmond Fed's Barkin suggests no rush to cut interest rates due to tariff risks re-heating inflation and resilient labor market and consumer spending.

Federal Reserve officials are signaling a widening divide over when to begin cutting interest rates, with Richmond Fed President Thomas Barkin warning that tariff-driven inflation risks still loom large. Barkin, in an interview with Reuters, expressed caution about reducing rates, stating, "I don’t think the data gives us any rush to cut" [2].

Barkin's comments come as the Fed grapples with the potential impacts of new tariffs on inflation. He noted that businesses in his district anticipate price gains later in the year due to new tariffs, and he remains concerned about the uncertainty surrounding trade policy [2]. Despite the labor market's resilience and steady consumer spending, Barkin believes that the current inflation rate is still over the target, and a cautious approach is necessary to address this [2].

The Federal Reserve's latest Monetary Policy Report to Congress acknowledged that inflation is "somewhat elevated" and that trade policy impacts are "highly uncertain" [1]. The central bank held its key rate steady at the recent meeting, with projections showing a near-even split: 10 officials see two or three cuts in 2025, while nine see one or none [1].

Federal Reserve Governor Christopher Waller, however, has advocated for a reduction in interest rates as early as July, arguing that inflation has cooled enough to justify easing monetary policy [1]. Waller believes that the tariff-driven inflation effects will be a one-off and not cause persistent inflation. He urged a cautious start to rate cuts, suggesting a slow reduction to avoid any big surprises [1].

Market reactions to the Fed's cautious stance have been mixed. As of 1:01 PM EDT on June 19, 2025, the Dow Jones rose 118.13 points (0.28%) to 42,289.79, the S&P 500 edged down 0.67 points to 5,980.20, and the Nasdaq slipped 54.82 points (0.28%) to 19,491.45 [1].

The next Fed meeting is scheduled for July, just ahead of a significant trade deadline that could bring another round of tariffs. Both Waller and Barkin have emphasized the need for a wait-and-see approach, with no immediate rush to cut rates [1, 2].

References
[1] https://nypost.com/2025/06/20/business/fed-divided-over-whether-to-slash-interest-rates-in-july/
[2] https://seekingalpha.com/news/4460398-richmond-feds-barkin-says-tariff-risks-leave-no-rush-to-cut-rates---report