Fed has a risk management problem – Richmond Fed president
“The economy is giving us conflicting signals,” Tom Barkin says
The Federal Reserve has a problem with risk management, Richmond Fed president Tom Barkin says, describing how conflicting risks are pulling monetary policy in opposite directions.
“Easing isn’t risk free,” Barkin said in a speech on September 26. If the Fed’s two recent interest rate cuts don’t push inflation up to target, he said, lower rates risk encouraging firms to “over-substitute” capital for labour.
The Fed reduced rates by 25 basis points on both July 31 and September 18. The
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