Barkin Says Businesses, Fed on Hold Until Uncertainty Clears
Federal Reserve Bank of Richmond President Tom Barkin said rapid policy changes by the Trump administration have created “a sense of instability” in the business community, and the associated decline in sentiment could “quiet demand.”
“Business optimism has dropped. Consumer sentiment has fallen,” Barkin said Thursday in prepared remarks for an event at Washington and Lee University in Lexington, Virginia.
With a solid labor market and still-elevated inflation, the Fed’s “moderately restrictive” stance is a “good place to be,” he said.
Barkin’s remarks come as the US central bank struggles to gauge the potential impact on the economy from a wave of new — and rapidly changing — policy directives from the Trump administration. President Donald Trump this week announced a 25% tariff on auto imports and is promising a bevy of so-called reciprocal tariffs on April 2.
Speaking to reporters after the speech, Barkin said he won’t assume that the impact of tariffs on inflation will be transitory — as Fed Chair Jerome Powell suggested last week.
“I’m open to the notion of it, but I don’t start with an assumption that this is a one-time increase in the price level that you simply look through,” Barkin said.
“We’ve been through a significant inflationary period,” he added. “That means the expectations have been loosened — not de-anchored, loosened — for both price setters and price receivers. And I’m cautious about the question of whether this will be as limited as that assumption would be open to.”
Fed officials last week held rates steady for a second straight meeting. Powell also repeated his view that policymakers needn’t rush to adjust rates. Barkin in his speech echoed that view.
“It’s not an everyday ‘forecasting is hard’ type of fog,” Barkin said. “It’s a ‘zero visibility, pull over and turn on your hazards’ type of fog.”
“If conditions start to shift, we are well positioned to adjust,” he said. “Until then, like businesses and consumers, we are waiting for the fog to clear.”
Source : Bloomberg
