In the past week, after the US election and the first public speech following the Fed's interest rate cut, Thomas Barkin, the Richmond Fed President who has the FOMC meeting voting rights this year, stated that the US economy is in good condition. Therefore, the Fed is ready and can respond to potential risks of future job declines or inflation increases as needed.

On Tuesday, November 12th, Eastern Time, Barkin stated at an annual summit in Baltimore, Maryland, that current US inflation is close to the Fed's target of 2%, the labor market is resilient, and the Fed is in the process of lowering borrowing costs. Therefore, Fed policymakers are prepared to respond once inflation pressures rise or the job market weakens.

Barkin said: "Strong but more discerning consumers, coupled with more efficient and more valuable labor, have put the economy in a good state." "Regardless of how the economy develops, the Fed has the ability to make appropriate responses."

"Consumers' sensitivity to prices is increasing, which helps suppress inflation. And because companies retain talent, the labor market remains resilient. The rise in productivity is partly due to companies investing in automation during the pandemic, and with reduced labor turnover, companies have more experienced workers. The good economic situation allows the Fed to lower the fed funds rate out of sync with other economic policies."

Barkin said that the Fed's next actions will depend on how companies perform. After the interest rate cuts and the end of the US election, companies will either be more confident about the future or continue to pursue 'economic recession strategies' by cutting jobs to address limited pricing power.

Barkin revealed that he is studying two economic scenarios: one where as election uncertainties fade, companies may begin investing and hiring again, allowing the Fed to focus on the risk of inflation rising. The second scenario is where companies may lay off employees to cope with profit squeezes resulting from weakened pricing power, thus increasing the Fed's employment risk.

Barkin is considering two economic scenarios: one where companies may start investing and hiring again as election uncertainties diminish, enabling the Fed to focus on the risk of rising inflation. The other scenario is where companies may dismiss employees to mitigate profit compression due to weakened pricing power, which will increase the Fed's employment risk.

He also mentioned the existence of more extreme situations, including possible financial market turmoil and economic shocks, whether from geopolitical or other factors.

At last week's post-FOMC press conference, Federal Reserve Chairman Powell reiterated that Fed officials are not in a hurry to cut interest rates, stating that the best way is to find a neutral interest rate for the economy, which is "cautious and patient." Regarding how the economy might be affected, Bullard responded to Powell's statements at last week's press conference by suggesting to observe what happens after the presidential election and then determine how the economy might be affected. He said:

"You do forecast based on trends, but you don't try to predict things that haven't happened yet, right? If you do, you really plunge into a painful reality. When things happen, you incorporate them into the forecast."

Also on Tuesday, Bullard's former colleague and former Cleveland Fed President Mester stated that if Trump's global tariff policy proposed during the election is implemented, the Fed's rate cuts next year may be lower than previously expected. She hinted that if Trump's fiscal plans materialize, the Fed's current outlook will change, and the market expectation of fewer interest rate cuts than the previously expected four times might be correct.

Mester said:

"Next year, the pace of rate cuts will be influenced by their (the Fed's) views on fiscal policy."

"I personally think the market is correct, the Fed's rate cuts next year may not be as much as assumed or expected in September."

Warren: Stablecoins may benefit the financial system, but legislation is needed to address security concerns.

Also on Tuesday, Christopher Waller, a "hot committee member" and Federal Reserve Board member who permanently holds FOMC voting rights, delivered a speech titled "What role should the private sector and the Fed play in payments," without mentioning the impact of monetary policy and elections.

Waller believes that the private sector should take the lead in payment industry innovation. "The private sector is often able to provide goods and services to the economy most reliably and efficiently. I apply this view to the payment ecosystem." He also asked, "Which fundamental market inefficiencies can be resolved through government intervention and can only be resolved through government intervention? If there is no satisfactory answer, then I believe the government should not intervene in private markets."

Waller mentioned that in the field of payments, three years ago, the public began to discuss more about creating a new payment tool called Central Bank Digital Currency (CBDC), stating that the Federal Reserve Committee is drafting a report to solicit public opinion on the potential benefits and risks of CBDC. Three years ago, he asked in a speech: What problems can CBDC solve? In other words, what specific interventions are needed for market failures or inefficiencies? Over the past three years, he has not heard any satisfactory answers about CBDC.

Waller also mentioned stablecoins, he believes stablecoins are essentially "synthetic" dollars, which can bring benefits to the financial system. These digital assets pegged to the dollar "may bring many potential benefits" and "eliminate" inefficiencies in the financial system. However, he stated that legislation is needed to address security issues, as these assets may face a run, thereby destabilizing the financial system.

Editor/Somer