Richmond Fed president says it’s not yet clear when the central bank should cut rates. ‘It’s really hard to drive when it’s foggy’

A senior federal reserve official said on Friday that the massive uncertainty created by President Donald Trump's prices had caused the reduction of certain job and expenses, threatening toslow downBut he added that it is not yet clear if the central bank should reduce its key interest rate.

Tom Barkin, president of the Richmond branch of the Federal Reserve, said that companies have become cautious, but are not yet committedStrong work cutsor any other typical behavior of a recession.

“The way I described it is, it is really difficult to drive when it is misty,” said Barkin in the comments of Loudoun, in the Virginia Chamber of Commerce. “This is what I see on the business side. Hiring freezes, discretionary expenses that are reduced, but not major layoffs. ”

Barkin and other Fed speakers have underlined the difficult challenge that the central bank is faced at the moment. If the prices increase inflation, the Fed would maintain high rates – or increase them more. But if the tasks aggravate the economy, the Fed would generally reduce rates.

Wednesday, President Jerome Powell said The risks of higher inflation and higher unemployment increase and that the Fed would expect greater clarity on the place where the economy is heading before making its next movement. Powell spoke after the Fed has kept its key rate unchanged for the third consecutive meeting.

Trump, however, continued to assault Powell duringno cutting rateWho over time could reduce loan costs for consumers and businesses.

Trump puts pressure for rate drops because he maintains that the economy no longer suffers from high inflation which prompted the Fed to increase the borrowing costs in 2022 and 2023.

But the most likely reason that the Fed reduces its key rate in the coming months, according to economists, would be to compensate for a net slowdown in the economy from prices. While companies see their costs increase due to their higher rights – about half of imports are parts used by American companies – they could institute widespread dismissals, raising unemployment and risking recession.

Gregory Daco, chief economist at EY, a consulting company, said he thought that the Fed should reduce rates soon because “the economy slows down and will continue to slow down and flirt with the recession”.

A key challenge for the Fed right now, however, is to determine what risk is more important for the economy, inflation or unemployment.

Barkin said it was too early to say that a drop in loan costs is necessary to stimulate growth.

“We have risks on the side of inflation, and if you see as I see that we have risks on the side of unemployment, then declaring that a risk is more important than the other at the moment, it is almost like guess,” said Barkin.

Barkin is one of the 19 managers who participate in the Eight Annual Fed meetings to decide on the interest rate rate policy. Only 12 of these members vote on the decision. Barkin is not one of the voters this year.

On Friday, other Fed officials echoed the prudent message from Barkin.

Michael Barr, member of the Fed of the FED Governors, said the prices could increase inflation for an extended period, probably leaving the Fed pending. This contrasts with certain economists, who think that the tasks will only make prices temporarily.

“Higher prices could lead to disturbances in world supply chains and create persistent pressure on inflation,” said Barr in written remarks presented earlier on Friday at a conference in Reykjavik, Iceland.

Barkin, however, seemed to have a different opinion on inflation in his remarks. He suggested that consumers short of money could be reluctant to pay higher prices for a long time, which could force manufacturers and retailers to eat additional costs.

“This means that it is to say that you will transmit it, but it is not as easy to transmit it as you think,” said Barkin.

This story was initially presented on Fortune.com