Richmond Federal Reserve Bank President Thomas Barkin said on Wednesday that they are watching the consumer activity most closely because that's the biggest part of the economy, per Reuters.
Key takeaways
"Worry if close to a moment where consumers decide to pull back; so far has not happened."
"Biggest thing affect consumer spending is whether they have a job, second is confidence, third is wealth effect."
"Equity market correction isn't what leads to consumer pullback."
"People are pulling back on air travel, but not on every day spending."
"If we see higher inflation and higher unemployment, Fed would handle response with judgment."
"Everyone says they'll pass on cost of higher tariffs, but consumer is also exhausted by higher price."
"When talking about tariffs, need to talk about inflation, but also about employment."
"World doesn't love that Dollar is reserve currency, but there aren't a lot of alternatives."
Market reaction
These comments don't seem to be having a noticeable impact on the US Dollar's valuation against its rivals. At the time of press, the USD Index was down 0.18% on the day at 100.44.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD: Bears await break below 1.1200 ahead of US-China joint statement
EUR/USD attracts some sellers on Monday, though it lacks bearish conviction. A break below 200-period SMA on H4 should pave the way for deeper losses. Any attempted move up is likely to confront a stiff barrier near the 1.1250 region.
GBP/USD trades with negative bias below 1.3300 amid modest USD strength
GBP/USD attracts some sellers as the US-China trade deal eases US recession fears and boosts the USD. The US-UK trade agreement and the BoE’s cautious tone support the GBP and limit losses for the major. Traders now look forward to speeches from BoE officials and FOMC members for some meaningful impetus.
Gold price struggles near one-week low; US-China joint statement awaited
Gold price kicks off the new week on a weaker note in reaction to the optimism over the US-China trade deal. Easing US recession fears and the Fed’s hawkish pause underpin the USD, and further weigh on the commodity. The XAU/USD bears await details on the US-China agreement before positioning for any meaningful downside.
Bitcoin awaits catalyst to push BTC above $109,000, US-UK and China deals fails to trigger rally
The United States unveiled its first major trade deal with the UK last week. The announcement was followed by talks of a highly anticipated deal with China. Both developments failed to catalyze a re-test of the all-time high in Bitcoin.
Why the UK-US trade deal won’t herald a wider tariff climbdown
For Britain, the UK-US deal secures lower tariffs without compromising forthcoming UK-EU talks. And for the US, it signals to investors that the administration is prepared to be flexible on tariffs. But we're sceptical that the deal will translate into a much wider de-escalation in US tariff policy.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.