MNI POLICY: Fed's Barkin: Insurance Rate Cuts Are Paying Off

By Jean Yung

     WASHINGTON (MNI) - The Federal Reserve's three interest rate cuts last year

have created a buffer against downside risks, leaving the economy in healthy

shape for now, Richmond Fed President Tom Barkin said Friday.

     "While there is always the risk of a shock, the Fed has done a lot to

support the economy's continued expansion and to provide buffers against the

downside," Barkin said.

     Having "bought some 'insurance'" against uncertainty stemming from

political and trade policy, "we're seeing this insurance pay off through the

traditional channels, such as auto and home sales," he said in remarks prepared

for the Maryland Bankers Association in Baltimore. 

     There's no indication of an imminent recession, though the economy faces

risks including a "heart attack" such as an escalation with Iran, a collapse in

international economies or policy uncertainty that has held down investment and

consumer confidence. 

     But Barkin said he was hopeful that recent trade deal news and the U.K.

election will help mollify that uncertainty. The economy looks "quite healthy"

with a strong labor market and "low and stable" inflation at around 1.6%, Barkin

noted. Credit markets are open and both consumer spending and saving are strong.

     GDP growth is slowing to around 2%, which suggests "we're converging to

normal levels rather than underperforming," he said. "The economy is growing at

about the rate we would expect it to grow." 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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