Top Fed official warns of US inflation risk after Donald Trump takes office

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A top Federal Reserve official has warned of the threat of further US inflation after Donald Trump takes office, as he predicted solid growth in the world’s major economies as a whole .

Richmond Fed President Tom Barkin said Americans are spending freely, job losses are still low and US consumers are starting to push back against higher prices.

But although this combination could provide “more of a reduction than a reduction in growth” in 2025, Barkin said he expected “more risk on the side of inflation”.

“Wage and product costs may see pressure,” he said in a speech on Friday. “If they do, given recent experience with inflation, price-setters may have more confidence to cover costs.”

Barkin’s comments come just weeks before Trump returns to the US presidency with a pledge to raise tariffs and cut taxes and regulations. He also vowed to sue immigration and mass deportations began.

Other economists they warned that the policy could trigger a new rate of inflation in the US.

Some Fed officials have also begun to account for Trump’s return in their forecasts, US central bank chairman Jay Powell said last month, by including “highly conservative estimates of the economic consequences of their policies in advance”.

Barkin stressed that uncertainty about what Trump would do was clouding the outlook, but he thought there could be “a long way to go” as final plans are worked out.

If economic growth were to suddenly collapse, he said, “the damage could be mitigated by the opportunity to reverse some of those policies”.

The Feed Last month it cut interest rates to 4.25-4.5 percent, while officials cut their forecasts for rate cuts in 2025 and 2026, and raised their inflation forecasts significantly.

Most officials now expect a half-point reduction this year, down from the full percentage point they posted in September.

Barkin on Friday said the Fed was “well positioned regardless of how the economy plays out”.

“Should employment collapse or inflation re-emerge, we have the tools to respond,” he said.