(Reuters) – The U.S. Federal Reserve (Fed) can respond appropriately if inflationary pressures rise or the job market weakens, Richmond Branch President Thomas Barkin said on Tuesday .

“Solid but more selective consumption, combined with a more productive and better valued workforce, have placed the economy in a good position,” he said in a document prepared for a speech at the Baltimore Together Summit in Maryland.

This allowed the Fed to lower its key rate, which was “out of sync” with the rest of the economy, he continued, while inflation in the United States is now close to the target of 2% from the Fed, without any notable deterioration in the labor market.

This is Thomas Barkin’s first public statement since the Fed last week lowered the fed funds rate target by 25 basis points to 4.50%-4.75%, judging the risks balanced on inflation and employment.

Thomas Barkin presents this decision as a recalibration of monetary policy towards “slightly less restrictive levels”, noting that the central bank’s future decisions will now depend on the behavior of businesses.

For him, it is a question of determining whether companies feel more comfortable about the future with this drop in rates and the fact that the American elections are now over or whether they maintain their outlook for a recession and respond to limited pricing power with layoffs.

There are also more extreme scenarios, he added, including the risk of financial market turmoil and economic shocks, whether linked to geopolitics or other factors.

“The Fed is able to respond appropriately regardless of how the economy develops,” he concluded.

(Report by Ann Saphir; by Claude Chendjou, edited by Blandine Hénault)

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