Fed Leaders Signal Steady Hands Amid Inflation, Independence, and AI Challenges

St. Louis Federal Reserve President Alberto Musalem emphasized that inflation remains nearly a full percentage point above the Fed’s 2% target, even as the labor market cools in an orderly fashion. He projected economic growth at or above 2% and unemployment stabilizing around 4.3%–4.4%. Musalem noted that tariffs account for about half of the excess inflation, which he expects to fade later this year. He stressed that policy is currently neutral in real terms and appropriately balancing risks, while reiterating the importance of “finishing the job” on inflation to support consumption and growth.


Schmid: Independence Is Key to Strong Decisions


Kansas City Fed President Jeffrey Schmid reaffirmed that politics do not enter policy debates, highlighting the Fed’s layered independence as a cornerstone of sound decision-making. He praised current Chair Jerome Powell as a patriot committed to the nation’s interests and welcomed the experience of incoming Chair Kevin Warsh. Schmid cautioned that the Fed will never return to its pre-crisis balance sheet size, explaining that debates now center on reserve levels and the duration of mortgage holdings, which have helped lower yields. He underscored that while the Fed remains attentive to markets, its primary focus is inflation, with the job market in a relatively strong position.

Barkin: AI Brings Opportunity, Not Crisis


Richmond Fed President Thomas Barkin addressed concerns about artificial intelligence and its impact on the labor market. He argued that monetary policy cannot resolve AI-driven volatility, cautioning against assumptions of widespread worker displacement. Instead, Barkin suggested that technology could create opportunities for workers to transition into higher-skilled roles, reshaping the labor market in constructive ways. He described himself as a cautious optimist, noting that while AI adoption may bring challenges, it is unlikely to cause massive upheaval in the economy.


Continuity Amid Change


Together, these remarks highlight the Fed’s balancing act: tackling inflation, safeguarding independence, managing its balance sheet, and preparing for leadership changes—all while navigating the disruptive potential of new technologies. With Kevin Warsh expected to take the helm later this year, policymakers are signaling continuity in the Fed’s dual mandate of price stability and maximum employment, even as the economic landscape evolves.