Introduces Tom Barkin, president of the Richmond Fed, and notes the low-fire, low-higher, tariff-affected economy seems stable.
speaker1
Tom Barkin
Disagrees with negative productivity view; cites 2.8% as a good number driven by company investments in processes, staffing models, and automation, with results visible today.
Notes productivity holds down inflation and maintains margins despite rising input costs, then asks about the impact of the Iran war on prices and the economy.
speaker1
Tom Barkin
Has no sense of duration or implications but is watching oil prices; notes pump prices have jumped recently, which matters for sentiment and crowds out other spending.
Recalls 1970s oil shock led to Fed easing mistake; asks if current situation puts rate cuts on hold.
speaker1
Tom Barkin
Will go meeting by meeting; higher gas prices are inflationary; textbook policy looks through short-term shocks but not long-term ones.
Notes pre-war view was at peak tariffs with inflation falling later this year; asks where Barkin stands on inflation progression and timing for cut decisions.
speaker1
Tom Barkin
Fall business conversations suggested limited pricing power and consumer exhaustion, indicating backside of inflation. Recent months of higher inflation pause that conclusion.
Asks if businesses, having absorbed costs, would have to raise prices if input costs increase further.
speaker1
Tom Barkin
Productivity is key; businesses expected to pass on tariffs last April but got consumer pushback, so prices didn't rise as expected. Healthy margins are due to productivity absorbing hits.
Asks what businesses say about employment, noting low hire, low fire trend.
speaker1
Tom Barkin
Businesses describe labor market as pretty open, maybe even loose, with high availability and low turnover. Example: poultry processors replaced workers easily.
Suggests Barkin thinks risks to inflation and employment are roughly balanced.
speaker1
Tom Barkin
In fall, risks were tilted toward labor market downside and inflation downside. Recent data suggests movement in the other direction.
Asks if monetary policy is set to bring down inflation or if it's too tight.
speaker1
Tom Barkin
Policy is modestly restrictive, which should help grind out the last mile. Not highly restrictive given continued strong demand.
Asks about dynamics with new Fed Chair Kevin Warsh, noting chair's power is persuasion.
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Tom Barkin
Likes and respects Kevin Warsh, trusts he'll do a good job, looks forward to working with him amid smart, opinionated colleagues.
Asks Barkin's view on Warsh's proposal for a smaller Fed balance sheet.
speaker1
Tom Barkin
Instinctively likes idea of Fed having smaller footprint in financial markets, subject to operating policy effectively and avoiding severe market reactions.
Asks about Warsh's desire for less Fed official conversation and more coordinated public interaction.
speaker1
Tom Barkin
Values his district-oriented outreach to chambers of commerce and rotary clubs to put a face on the Fed and gather economic insight.
Asks if Barkin would like Jay Powell to stay on as a Fed governor after his chair term.
speaker1
Tom Barkin
Likes Jay Powell tremendously, thinks he's done a spectacular job, and wants what's best for Jay.