MNI BRIEF: Fed's Barkin Wants Price Confidence, Watching Labor

Richmond Fed President Tom Barkin said Tuesday the U.S. central bank needs to have confidence inflation will move down before lowering interest rates again and also noted concerns about tariff harming the labor market. 

"Give it some time to see if we can't figure out what a stable policy regime is, and then we can start thinking more about policy. But we'll see what we learn tomorrow and in the days that follow, in terms of where the economy goes," he said at a Council on Foreign Relations event in New York, referencing President Trump's planned tariff announcements April 2. 

Barkin said the impacts from current tariffs are likely to be different than the experience in 2018 and 2019, in part because of the pandemic inflation episode. "It's sort of a cage match between an emboldened supplier who really believes that they've got to pass on these tariffs and a frustrated consumer who really believes that I'm not paying those high prices anymore, and where that lands is going to be very interesting to see." 

"Obviously some amount of that will pass through into prices, and so that will be inflationary, and maybe it'll be short term, maybe it'll be long-term," he said. "But I'm just as interested in what's going to happen on the employment side, because if you're a company that raises prices, the demand curve would suggest your volume is going to go down. And if you're a company that can't raise prices, then your margin goes down. In either case, you're going to start working on operational efficiencies, and that means head count." (See: MNI INTERVIEW: Tariff Inflation To Sideline Fed-Ex CEA Econ)

Higher inflation and lower employment "creates challenges for us, for the monetary policy side, because the business is a lot easier if you're doing a framework in 2019 and unemployment is low and inflation is low. It's harder if things move in the other direction," he said.