FOMC voter hints this year: a 25 basis point rate cut in September is possible!

Richmond Fed President Barkin said in a recent commentary that the current employment decision-making by U.S. companies, adopting a "low hiring, low firing" approach, is unlikely to continue. He pointed out that if the economy weakens, companies may start laying off employees.

In recent weeks, the Fed's concerns about the job market have intensified, which is also a major reason why Fed Chairman Powell mentioned the need to cut interest rates last Friday to prevent further unexpected deterioration of the U.S. unemployment rate.

Barkin, in a podcast recorded at the Fed's economic symposium last Friday, stated that although companies have become more conservative in filling positions, the situation where they are unwilling to lay off employees has not yet emerged.

Barkin said, "Either demand will continue to grow, and people will start hiring again, or you will start to see layoffs. We are in a low hiring, low firing mode. It doesn't feel like something that will continue."

This year, the U.S. unemployment rate has steadily risen to the current 4.3%, but this is mainly due to a slowdown in hiring and more people starting to look for work, while the layoff rate remains low.

To guard against downside risks in the job market, the Fed is almost certain to cut interest rates at the September meeting.

Barkin stated that he is taking a "trial and error" approach to cutting rates, indicating that he may support a 25 basis point cut, rather than the 50 basis points cut some analysts expect. He pointed out that the inflation rate is still half a percentage point above the Fed's 2% target, and that rate cuts may ultimately boost inflation by stimulating demand for housing and other goods.

It is worth noting that Barkin is an FOMC voter this year, and he expressed confidence in easing price pressures, especially as the anti-inflation process becomes more widespread—not just concentrated in the goods sector. Barkin said:

"We have seen very low inflation growth for four consecutive months now, with low inflation growth in each subcategory. Six months ago, eight months ago, only goods inflation growth was slowing down. Therefore, concerns about inflation re-accelerating have certainly eased."