Richmond Fed President Tom Barkin Talks Fed Outlook Under Trump

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So here's the last this this morning, Trade is bracing for economic data after Fed official signal more clarity is needed on President Trump's economic plants. The Federal Reserve Bank of Richmond President Tom Barkin joined US Now for more alongside Bloomberg's Michael McKee, President Parking. Good to see you, sir, to come show once again.

Happy to be back with you.

The first question we asked Fed officials these days is did you include possible tariff changes in your Roundlook, so let's start that.

Did you well, so.

You're talking about forecasts we did in December. Yeah, that seems like a long time ago, now, doesn't a lifetime agot?

Yeah?

No, So I think right now, if you look forward, you have to say tariffs are coming or here are going to be here. It's just incredibly hard to know exactly what it's going to be. So I think the concept of tariffs, sure, but the reality of what specific tariffs are, what specific countries, or what Pacific percent or what Pacific goods we don't know.

The market seems to believe that on the margins, this just means the that is going to take its time that you're going to take your time and assess all the data, including all the tariff announcements, and that you're not going to be in any rush and potentially may not cut.

It all this year.

Do you agree that on the margins, the tariffs and the potential rammifications, the uncertainty would delay you from cutting rates.

Well, what I'm hearing from everyone I talk to is just elevated policy uncertainty.

And you mentioned tariffs.

But deregulation, where is it going to hit, where's the tax plan going to come out, What's going to happen in net migration, energy.

Policy, geopolitics.

I think there's just a lot of uncertainty in the air, and it's very hard to know what's happening with growth and employment, what's happening with inflation until you get a little more clarity on all of these uncertainties.

So what are companies telling you they're going to do now? Is everybody just sitting on their hands? What does this imply for the uncertainty imply for the economy.

So I think it's really interesting to look at these optimism indices, and if you go back to November and December, the Richmond Fed and the Lanta Fed and Duke do a survey of CFOs. What you saw was total optimism on the economy went up significantly new administration, Climate for business whatever. Optimism about your own company pretty much flatlined. And I think that's because people are dealing with this uncertainty. We think this will be good, but I don't know

And that's what I'm looking to see.

Well, what's your kind of baseline for how you're going to judge the economy Given all of the uncertainty. You go into March nineteenth and you have to make a decision.

One way or the other.

The default, I guess would be to do nothing. Where do you think the economy is going to end up over the next six months while this cloud is over us.

Well, the case for weight and see is in fact that you want to wait and see.

I mean, I.

Start with a baseline economy that's the data has been pretty favorable. I mean, we had a pretty good growth in the fourth quarter, a consumer spendings healthy, inflation, especially the last two months, has come down, and I expect the twelve month numbers to come down nicely over the next couple months as we lap last year's elevated first

We'll just have to see.

Do you still see the FED cutting at some point this year.

I mean, that's certainly the lean, but we'll see what happens.

Could the Fed can potentially see anything that could cause you to contemplate hiking rates.

Well, I never take anything off the table, and so if you never take anything off the table, you can't take anything off the table.

So I'm not to do that.

But you'd have to see an economy overheating, and I don't see any signs of an economy overheating. I see inflation coming down, not going up. I see the job stabilizing. But we got the jolt steady yesterday. It seemed to come down a little bit. It doesn't feel like we're overheating, and I think you'd have to imagine you're seeing an economy overheating.

Let me go back to the base case idea at this point, do you think that interest rates are suitable for this economy? For a while, the Fed was saying we need to cut because we're still tight.

But if you can't, is that okay?

Are you looking for data that will tell you to cut or are you looking for data that.

Will tell you to hold well.

So I supported the recalibration we did obviously in the fall, and that's because with inflation in the twos and unemployment weakening at the time, the one number that seemed out of range was having the FED funds rate at five point three.

So we've brought down one hundred basis points. Sin's at four point three.

I still think that's moderately restrictive, but we'll learn as we go, and if what happens is the economy comes back strong, you have to ask yourself questions about how restrictive you really are. If the economy weakens further, you can adjust appropriately. If inflation continues to come down, you could say, yep, I'm having the impact.

I want to have. If it doesn't, you know, you ask yourself those questions.

And so I think we've recalibraated to a place that is more sensible, given you know where the economy sits right now, and I think it leaves us well positioned on whatever happens.

But to go back to a very old fed term, what what would your bias be towards cutting?

My bias is to see what happens and then react appropriately. As I said, I think if you look at the last sep, there's a lean in there, you know, toward cutting, but let's see what happens.

That suggests you might be equally as open to hiking. Is that a case?

That's another good way to ask the exact same question. So I think the lean is toward better. Let's see what happens.

So you would be up into doing so, as I said earlier line this morning, But I just want to understand how open minded you are.

Oh, I'm open.

I'm always open minded on what happens with the data. If you see an economy that overheats, you'd have to respond to it. I don't see an economy yet close to overheating.

There was some questions about whether we are accommodative right now restrictive? Can I just finish that the Federal Reserve chat check down. I'm sure you watched the news conference set that you were restrictive, then said financial conditions were accommodative. Can you square that circle so well?

So?

I do think we're somewhat restrictive. I don't think we're hugely restrictive. We're a lot less restrictive obviously than we were, you know, six months ago.

But we'll see as we go.

And like I said, if inflation continues to come down, that would be a positive sign. If the economy continues to you know, perform at a decent but not overheated level, that's a sign. But if you start seeing an economy, you know, heat up, yeah, then you'd have to ask yourself those questions.

President Barkin appreciate your time, as always said, thank you to be here. The Federal Reserve Bank of Richmond President Tom Barkin that