Richmond Fed President Barkin Predicts Inflation Will Decline Next Year

Forex - Richmond Fed President Tom Barkin stated that he expects inflation to continue to decrease over the next year and implied that the pace of interest rate cuts will slow down. In an interview with Yahoo Finance, Barkin said, "I expect core inflation to drop."

He attributed the recent stagnation in core inflation to tougher comparisons compared to the previous year, noting that higher figures were observed in the first quarter of this year, which could make inflation numbers for the first quarter appear more favorable.

"I don’t hear the kind of inflation we saw in the past. This gives me hope that these figures will drop as we get past the first quarter," Barkin stated, referring to the core personal consumption expenditures price index, which the Fed follows to measure inflation and has been above 2.5% in recent months.

Barkin also highlighted his discussions with people in the field, indicating that consumers are making promotional purchases, trading down, and visiting lower-priced stores, which conveys a message to businesses that their pricing power is limited.

"When I test what businesses are planning in terms of price increases for the first quarter, this comes to light. I don’t hear the kind of inflation we saw in the past, and this gives me hope that these figures will drop as we get past the first quarter," Barkin remarked, as the inflation data for October released this week showed very little progress towards this goal, raising questions about how deeply the Fed will cut interest rates by 2025.