A senior Federal Reserve official warned that due to companies preparing for the intensified trade protectionism and xinjingji policy impacts that might arise after Trump's return to the White House, the usa is more susceptible to inflation shocks than ever before.

Richmond Federal Reserve President Barkin pointed out that although the monthly data released by government institutions shows that progress against inflation is stagnating, he expects the inflation rate in the usa, the world's largest economy, to continue to decline.

He warned that although inflation is currently far lower than the peak reached during the COVID-19 pandemic, companies are now passing costs onto consumers at a faster rate than in the past, which impacts inflation.

Barkin said, "In terms of inflation, whether it is wage-related or other cost shocks, we are more susceptible to impact than we were five years ago." He is in charge of interest rate decisions this year.The Federal Open Market Committee (FOMC)Voting member.

This Richmond Federal Reserve President, who previously served as Chief Risk Officer at consulting giant McKinsey, also pointed out that businesses are "worried" about the inflation impact of the comprehensive tariffs and plans to expel illegal immigrants that Trump boasts about during his campaign.

Barkin said, "I can understand why businesses think this way," but he noted that other policies related to increasing domestic energy production under Trump "may have a deflationary effect."

Many economists are also concerned that imposing widespread tariffs on us imported goods will reignite inflation, but the extent of the impact will depend on which policies are adopted and how they are implemented. They also warned that large-scale expulsions of illegal immigrants could lead to rising prices while hindering economic growth, resulting in stagflation shocks.

Trump and his economic advisors dismissed these warnings, stating that their policies will combine deregulation and tax cuts to make the usa economy stronger while controlling inflation.

Barkin believes that the Federal Reserve should not preemptively adjust monetary policy before any changes in economic policy occur. "We should not try to solve a problem before it arises," he said.

Federal Reserve officials have cut rates twice this year and are discussing whether to cut rates again at the last meeting in December. Fed Chairman Powell reiterated last week that, given the potential strength of the economy, the Fed is not in a hurry to lower interest rates to a level that restricts growth.

Traders in the federal funds futures market predict that the Federal Reserve will continue to cut rates by 25 basis points in December.

Barkin stated that he does not want to "prejudge the situation in December," but added that the upcoming rate decision will depend on data, and current data indicate that the economy is "quite prosperous."

He said, "If inflation remains above our target, then caution will need to be taken regarding rate cuts. If the unemployment rate rises sharply, then a more proactive approach to rate cuts will be necessary."

Barkin described the recent policy moves of the Federal Reserve as a "recalibration," stating that once the Fed enters a "normalization phase" and its policy settings are closer to a "neutral" level, the issue of the pace of rate cuts will become more important.

Fed Governor Bowman, who spoke on Wednesday, was the only dissenter to the Fed's decision in September to cut rates by 50 basis points, supporting "cautious" rate cuts. Another Fed governor, Cook, also agreed on gradual rate cuts on Wednesday.