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Investing.com -- Federal Reserve Vice Chair for Supervision, Michael Barr, addressed the Council on Foreign Relations today, discussing the state of the economy, inflation, and policy uncertainties.
Barr expressed positive sentiments about the economy, citing strong growth in the past year, and a low and stable unemployment rate. He also mentioned substantial progress made on inflation, while acknowledging that there is still more work to be done. He described the path towards a 2% inflation rate as "bumpy but steady."
Barr also addressed the inflation spike seen in January, attributing it to anticipated seasonal patterns. He expects this to moderate in the months of February or March, though changes in policy environment may affect this.
When asked about tariffs, Barr stated that it is too early to determine how they will impact the economy. He emphasized the existing uncertainties about the policy, such as which products will be affected, the duration of the tariffs, and whether they will be permanent or temporary.
Barr expressed a preference for understanding policy first, then assessing its implications for the economy, and finally its effects on monetary policy.
He reassured that the Federal Reserve is closely monitoring data as it evolves, and is prepared to act if inflation drops faster than expected or if the labor market weakens more than projected.
Barr also mentioned that it’s too early to predict the effects of immigration policy on the economy and, by extension, monetary policy. He noted that, in theory, a reduced labor force could lead to decreased potential output, but indicated that the Federal Reserve will be looking to see if this effect is significant.
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