Richmond Fed’s Tom Barkin on the Surprisingly Resilient Real Economy

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Tracy Alloway** (0:18)
Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

**Joe Weisenthal** (0:22)
And I'm Joe Weisenthal.

**Tracy Alloway** (0:23)
Joe, we're still in Jackson Hole.

**Joe Weisenthal** (0:25)
That's right.

**Tracy Alloway** (0:25)
Plenty to talk about.

**Tom Barkin** (0:26)
Plenty.

**Tracy Alloway** (0:27)
We just got the speech from Fed Chair, Kevin Warsh.

**Tom Barkin** (0:30)
That's right.

**Tracy Alloway** (0:31)
Which I think most people would describe as hawk-ish, although maybe there's kind of a gap in between the hawk and the ish part.

**Tom Barkin** (0:37)
Sure.

**Tracy Alloway** (0:38)
And there's still plenty of questions about the direction of the US economy and monetary policy in general. So we should talk a little bit more about it.

**Joe Weisenthal** (0:45)
We should. And beyond that, you know, there's many theoretical questions out there. What is the neutral rate of interest? What is the role of AI on productivity? And all of that is very interesting. Where's the term premium at? But also, it'd be interesting to know what the central bankers are hearing about actual businesses right now and like, what's going on on the ground?

**Tracy Alloway** (1:04)
On the ground color.

**Tom Barkin** (1:04)
Okay.

**Tracy Alloway** (1:05)
And there is one man that we go to for on the ground color. We have the perfect guest, of course. We're going to be speaking with Richmond Fed president, Tom Barkin. So Tom, thank you so much for coming back on Odd Lots.

**Tom Barkin** (1:15)
Great to be back with you. I think it's my third year in a row here in Jackson Hole.

**Tracy Alloway** (1:19)
Oh, we appreciate it.

**Tom Barkin** (1:20)
Yeah, I know. And they let you outside of the hotel room. We get the two tons in the back.

**SPEAKER_1** (1:23)
That's right.

**Tracy Alloway** (1:24)
The production values have gone up, I will say. Okay, so let's just start very simply. Warsh's speech. What do you think?

**Tom Barkin** (1:31)
I mean, he does a great job. He's a great speaker and I thought it was a very authentic speech. I mean, Kevin laid out, I think, how he sees the world. He laid out how he sees the economy.
The folks I've talked to appreciated the clarity in the thing. And I personally thought he had a very accurate sense of the economy. So I was very much aligned with what he said and I thought he said it well.

**Joe Weisenthal** (1:50)
So he said, okay, inflation seems to be going in the wrong direction right now.
He described policy as not restrictive. So then you fill in the blanks and it's like, okay, that means rate hikes. But he didn't quite say that. Just for you, as you see things, A, do you agree about inflation and the stance of policy? But then more importantly, then what do we do about it?

**Tom Barkin** (2:10)
Yeah, so the economy is solid, I think he said that. And you can definitely see that in the GDP numbers and the consumer spending numbers. I mean, it's been crazy this year that gas prices went up and consumer spending accelerated. It's been crazy that you have all this uncertainty and artificial intelligence spending has led business investment to almost double versus this historic thing. So there's a lot of momentum in the economy. Jobs market seems to have stabilized, unemployment rates low, so all that's good. And I'm not saying inflation is definitely heading in the wrong direction, it's just not in the right place. And that's how I think of it, it's not in the right place. I also would say the job market's good, but it's not frothy. I mean, the low-fire thing continues. And so, that's where we are, the policy thing we'll figure out. I've had the number one thing people have asked me after his speeches, well, I guess that makes, you know, September, that tells you something for September. And I said, well, I listen to his speech and I'm pretty sure he doesn't like forward guidance.
So I don't think you should take any forward guidance from a speech from a guy who doesn't give forward guidance. I think it's probably a good way to think about it.

**Joe Weisenthal** (3:09)
We can't help ourselves is the problem.

**Tom Barkin** (3:10)
No, I know, but it's, I mean, I think you can talk about the economy in a very good way and then you can talk about forward guidance. You can choose not to do forward guidance, you don't do forward guidance.

**Tracy Alloway** (3:19)
I want to talk more about forward guidance, but since you mentioned the resilience of the economy, do you have a working theory for what's going on here? Because I think to your point earlier, it's surprised a lot of people that even with prices still pretty high, gas going up, all the economic uncertainty, consumers keep spending.