Fed’s Barkin: Strained Consumer Finances Weaken Tariff-Driven Inflation Effects

According to a report by Jinse Finance, the Wall Street Journal cited Federal Reserve official Thomas Barkin as saying that there are currently numerous signs indicating that middle- and low-income consumers are feeling more financially strained than a few years ago. This could dampen their spending, thereby mitigating the inflationary impact of tariffs. “The theory that tariff costs will inevitably be passed on to consumers and cause a surge in inflation must be tested against how consumers actually respond,” he stated. “I believe consumers will accept price increases for certain essential goods, but they will inevitably resist higher prices in other areas by trading down or delaying purchases.” Speaking about the inflation outlook, Barkin noted, “We will see some inflation, but it will be milder than expected, because this is no longer 2022—when consumers had ample cash and a strong willingness to spend. The reality in 2025 is that consumers are feeling financially squeezed and therefore have to be more frugal.”