MNI: Fed's Barkin Waiting For Policy Uncertainty To Abate
MNI (WASHINGTON) - The prospect of tariffs and other policy changes from Washington is clouding the outlook in a way that makes it best for Federal Reserve officials to take their time before making any further moves on interest rates, Richmond Fed President Thomas Barkin said Tuesday.
"It’s hard to make significant monetary policy changes amid such uncertainty. So, I prefer to wait and see how this uncertainty plays out and how the economy responds," he said in prepared remarks. (See MNI INTERVIEW: Fed To Stay Careful Amid Policy Turmoil-Johnson)
Barkin says he is encouraged by progress on inflation despite recent bumpiness in the data.
"We won’t have January PCE data until the end of the month, but most estimates suggest both headline and core will fall. We aren’t yet back to our target, but we have come a long way," Barkin said in a speech to the Rotary Club of Richmond.
"All this uncertainty argues for caution as we look to wrap up the inflation fight. If headwinds persist, we may well need to use policy to lean against that wind. But for now, I take comfort in the significant drop of inflation from its peak and look forward to further progress."
Barkin cautioned against relying too much on historical precedent for guidance on the likely impact of any tariff measures from the Trump administration.
"History gives us some guidance, but it’s unclear how applicable it’ll be to the present environment. I’ve seen economic analysis of the 2018 tariffs concluding that they increased inflation by about 30 basis points," he said.
"But the policies this time won’t be exactly the same, and we don’t know whether our recent experience with inflation will exacerbate or mitigate the impact this time. Will firms be more willing to pass costs along this time, or will consumer frustration with higher prices lead them to resist further price increases?"