WEBVTT - Richmond Fed President Tom Barkin Talks Fed Outlook Under Trump

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>So here's the last this this morning, Trade is bracing

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<v Speaker 2>for economic data after Fed official signal more clarity is

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<v Speaker 2>needed on President Trump's economic plants. The Federal Reserve Bank

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<v Speaker 2>of Richmond President Tom Barkin joined US Now for more

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<v Speaker 2>alongside Bloomberg's Michael McKee, President Parking. Good to see you, sir,

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<v Speaker 2>to come show once again.

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<v Speaker 3>Happy to be back with you.

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<v Speaker 2>The first question we asked Fed officials these days is

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<v Speaker 2>did you include possible tariff changes in your Roundlook, so

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<v Speaker 2>let's start that.

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<v Speaker 3>Did you well, so.

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<v Speaker 1>You're talking about forecasts we did in December. Yeah, that

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<v Speaker 1>seems like a long time ago, now, doesn't a lifetime agot?

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<v Speaker 3>Yeah?

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<v Speaker 1>No, So I think right now, if you look forward,

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<v Speaker 1>you have to say tariffs are coming or here are

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<v Speaker 1>going to be here. It's just incredibly hard to know

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<v Speaker 1>exactly what it's going to be. So I think the

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<v Speaker 1>concept of tariffs, sure, but the reality of what specific

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<v Speaker 1>tariffs are, what specific countries, or what Pacific percent or

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<v Speaker 1>what Pacific goods we don't know.

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<v Speaker 4>The market seems to believe that on the margins, this

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<v Speaker 4>just means the that is going to take its time

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<v Speaker 4>that you're going to take your time and assess all

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<v Speaker 4>the data, including all the tariff announcements, and that you're

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<v Speaker 4>not going to be in any rush and potentially may

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<v Speaker 4>not cut.

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<v Speaker 3>It all this year.

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<v Speaker 4>Do you agree that on the margins, the tariffs and

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<v Speaker 4>the potential rammifications, the uncertainty would delay you from cutting rates.

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<v Speaker 1>Well, what I'm hearing from everyone I talk to is

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<v Speaker 1>just elevated policy uncertainty.

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<v Speaker 3>And you mentioned tariffs.

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<v Speaker 1>But deregulation, where is it going to hit, where's the

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<v Speaker 1>tax plan going to come out, What's going to happen

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<v Speaker 1>in net migration, energy.

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<v Speaker 3>Policy, geopolitics.

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<v Speaker 1>I think there's just a lot of uncertainty in the air,

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<v Speaker 1>and it's very hard to know what's happening with growth

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<v Speaker 1>and employment, what's happening with inflation until you get a

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<v Speaker 1>little more clarity on all of these uncertainties.

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<v Speaker 5>So what are companies telling you they're going to do now?

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<v Speaker 5>Is everybody just sitting on their hands? What does this

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<v Speaker 5>imply for the uncertainty imply for the economy.

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<v Speaker 1>So I think it's really interesting to look at these

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<v Speaker 1>optimism indices, and if you go back to November and December,

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<v Speaker 1>the Richmond Fed and the Lanta Fed and Duke do

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<v Speaker 1>a survey of CFOs. What you saw was total optimism

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<v Speaker 1>on the economy went up significantly new administration, Climate for

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<v Speaker 1>business whatever. Optimism about your own company pretty much flatlined.

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<v Speaker 1>And I think that's because people are dealing with this uncertainty.

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<v Speaker 1>We think this will be good, but I don't know

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<v Speaker 1>how it's going to play out in my business. Small

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<v Speaker 1>business uncertainty had the biggest jumping, I mean sorry, optimism

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<v Speaker 1>had the biggest jump in it's forty year history, and

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<v Speaker 1>then went up again last month. And I think small

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<v Speaker 1>businesses are saying climate for business now they do more

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<v Speaker 1>of the hiring. The big businesses do more of the

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<v Speaker 1>big investments, and so I think it's possible we may

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<v Speaker 1>see another year like twenty nineteen where consumers are spending

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<v Speaker 1>and people are hiring, but investment sentiment is still a

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<v Speaker 1>question mark.

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<v Speaker 3>And that's what I'm looking to see.

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<v Speaker 5>Well, what's your kind of baseline for how you're going

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<v Speaker 5>to judge the economy Given all of the uncertainty. You

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<v Speaker 5>go into March nineteenth and you have to make a decision.

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<v Speaker 3>One way or the other.

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<v Speaker 5>The default, I guess would be to do nothing. Where

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<v Speaker 5>do you think the economy is going to end up

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<v Speaker 5>over the next six months while this cloud is over us.

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<v Speaker 1>Well, the case for weight and see is in fact

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<v Speaker 1>that you want to wait and see.

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<v Speaker 3>I mean, I.

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<v Speaker 1>Start with a baseline economy that's the data has been

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<v Speaker 1>pretty favorable. I mean, we had a pretty good growth

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<v Speaker 1>in the fourth quarter, a consumer spendings healthy, inflation, especially

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<v Speaker 1>the last two months, has come down, and I expect

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<v Speaker 1>the twelve month numbers to come down nicely over the

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<v Speaker 1>next couple months as we lap last year's elevated first

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<v Speaker 1>quarter numbers. Job market seems to have stabilized. So I

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<v Speaker 1>start with a baseline that's pretty favorable for what we're

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<v Speaker 1>trying to do, and then you have uncertainty, and it

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<v Speaker 1>could take us up, it could take us down.

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<v Speaker 3>We'll just have to see.

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<v Speaker 4>Do you still see the FED cutting at some point

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<v Speaker 4>this year.

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<v Speaker 1>I mean, that's certainly the lean, but we'll see what happens.

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<v Speaker 4>Could the Fed can potentially see anything that could cause

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<v Speaker 4>you to contemplate hiking rates.

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<v Speaker 1>Well, I never take anything off the table, and so

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<v Speaker 1>if you never take anything off the table, you can't

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<v Speaker 1>take anything off the table.

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<v Speaker 3>So I'm not to do that.

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<v Speaker 1>But you'd have to see an economy overheating, and I

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<v Speaker 1>don't see any signs of an economy overheating. I see

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<v Speaker 1>inflation coming down, not going up. I see the job stabilizing.

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<v Speaker 1>But we got the jolt steady yesterday. It seemed to

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<v Speaker 1>come down a little bit. It doesn't feel like we're overheating,

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<v Speaker 1>and I think you'd have to imagine you're seeing an

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<v Speaker 1>economy overheating.

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<v Speaker 5>Let me go back to the base case idea at

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<v Speaker 5>this point, do you think that interest rates are suitable

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<v Speaker 5>for this economy? For a while, the Fed was saying

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<v Speaker 5>we need to cut because we're still tight.

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<v Speaker 3>But if you can't, is that okay?

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<v Speaker 5>Are you looking for data that will tell you to

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<v Speaker 5>cut or are you looking for data that.

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<v Speaker 3>Will tell you to hold well.

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<v Speaker 1>So I supported the recalibration we did obviously in the fall,

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<v Speaker 1>and that's because with inflation in the twos and unemployment

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<v Speaker 1>weakening at the time, the one number that seemed out

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<v Speaker 1>of range was having the FED funds rate at five

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<v Speaker 1>point three.

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<v Speaker 3>So we've brought down one hundred basis points. Sin's at

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<v Speaker 3>four point three.

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<v Speaker 1>I still think that's moderately restrictive, but we'll learn as

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<v Speaker 1>we go, and if what happens is the economy comes

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<v Speaker 1>back strong, you have to ask yourself questions about how

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<v Speaker 1>restrictive you really are. If the economy weakens further, you

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<v Speaker 1>can adjust appropriately. If inflation continues to come down, you

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<v Speaker 1>could say, yep, I'm having the impact.

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<v Speaker 3>I want to have. If it doesn't, you know, you

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<v Speaker 3>ask yourself those questions.

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<v Speaker 1>And so I think we've recalibraated to a place that

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<v Speaker 1>is more sensible, given you know where the economy sits

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<v Speaker 1>right now, and I think it leaves us well positioned

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<v Speaker 1>on whatever happens.

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<v Speaker 5>But to go back to a very old fed term,

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<v Speaker 5>what what would your bias be towards cutting?

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<v Speaker 1>My bias is to see what happens and then react appropriately.

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<v Speaker 1>As I said, I think if you look at the

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<v Speaker 1>last sep, there's a lean in there, you know, toward cutting,

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<v Speaker 1>but let's see what happens.

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<v Speaker 2>That suggests you might be equally as open to hiking.

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<v Speaker 2>Is that a case?

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<v Speaker 3>That's another good way to ask the exact same question.

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<v Speaker 3>So I think the lean is toward better. Let's see

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<v Speaker 3>what happens.

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<v Speaker 2>So you would be up into doing so, as I

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<v Speaker 2>said earlier line this morning, But I just want to

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<v Speaker 2>understand how open minded you are.

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<v Speaker 3>Oh, I'm open.

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<v Speaker 1>I'm always open minded on what happens with the data.

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<v Speaker 1>If you see an economy that overheats, you'd have to

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<v Speaker 1>respond to it. I don't see an economy yet close

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<v Speaker 1>to overheating.

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<v Speaker 2>There was some questions about whether we are accommodative right

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<v Speaker 2>now restrictive? Can I just finish that the Federal Reserve

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<v Speaker 2>chat check down. I'm sure you watched the news conference

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<v Speaker 2>set that you were restrictive, then said financial conditions were accommodative.

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<v Speaker 2>Can you square that circle so well?

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<v Speaker 3>So?

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<v Speaker 1>I do think we're somewhat restrictive. I don't think we're

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<v Speaker 1>hugely restrictive. We're a lot less restrictive obviously than we were,

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<v Speaker 1>you know, six months ago.

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<v Speaker 3>But we'll see as we go.

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<v Speaker 1>And like I said, if inflation continues to come down,

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<v Speaker 1>that would be a positive sign. If the economy continues

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<v Speaker 1>to you know, perform at a decent but not overheated level,

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<v Speaker 1>that's a sign. But if you start seeing an economy,

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<v Speaker 1>you know, heat up, yeah, then you'd have to ask

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<v Speaker 1>yourself those questions.

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<v Speaker 2>President Barkin appreciate your time, as always said, thank you

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<v Speaker 2>to be here. The Federal Reserve Bank of Richmond President

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<v Speaker 2>Tom Barkin that