Fed's Barkin (2027 Voter, Neutral) says policy rate is now at the higher end of the neutral rate estimate, still an open question about when inflation will fall to 2%

• Recent economic data has been encouraging on the demand side, employment and inflation.
• A world of no job growth is 'uncomfortable' even if unemployment rate stays low.
• Concerned about risks to employment and inflation.
• Productivity is coming not just from AI, but from companies wanting to limit hiring, adapting to past labour shortages.

• Size of balance sheet is odd to focus on solely because it includes so many things like cash in circulation, Treasury general account, along with bank reserves.
• Open to a conversation about any aspect of the balance sheet or other Fed operations

• Fed is facing a different question now, with inflation above target, than the Greenspan-led Fed did in the 1990s.
• Does not know Kevin Warsh well, but that Fed chair nominee seems capable and charismatic.

• Hopes the shutdown causes only a few days of delay in data.

Barkin's remarks indicate a cautious approach from the Fed, emphasizing that while the policy rate is at the upper bound of the neutral range, clarity on inflation's return to 2% remains elusive. His acknowledgment of positive demand-side data alongside concerns about potential labor market risks reflects the delicate balancing act the Fed faces, likely leading to continued scrutiny in both fixed income and FX markets, especially around the USD's direction.