Economist Craig Shapiro has said that the Federal Reserve has been “gaslighting the public,” after the President of the Federal Reserve Bank of Richmond, Tom Barkin said Thursday that inflation is not “de-anchored”.
What Happened: Barkin, while speaking to the reporters after his speech on Thursday, acknowledged that the U.S. economy has been through a significant inflationary period.
“That means the expectations have been loosened—not de-anchored, loosened—for both price setters and price receivers,” he added.
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Reacting to this, Shapiro, a macro strategist at the Bear Traps Report, said, “Federal Reserve trying out a new word to continue gaslighting the public into the idea that inflation expectations are still well-anchored.”
For now, an uncertainty-driven drop in sentiment looks like it could quiet demand, said Barkin during the speech. “The outlook once the fog lifts will in part depend on how long it lasts,” he added.
Barkin also countered Chairman Jerome Powell‘s tariff-induced “transitory inflation” remark and told the reporters that he wouldn’t assume that there would just be a one-time increase in price levels, which could be overlooked.
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Why It Matters: While Powell has reiterated the Fed’s focus on its dual mandate given to it by Congress – maximum employment and stable prices.
Setting policy is likely to become trickier for the central bank as it projects a higher unemployment rate of 4.4% and a 1.7% change in its real GDP during 2025, all while Powell dismisses inflation concerns as “transitory.”
Barkin described this situation as finding your way through a dense fog. “With all this change, a dense fog has fallen. It’s not an everyday, ‘forecasting is hard’ type of fog. It’s a ‘zero visibility, pull over and turn on your hazards’ type of fog.”
