Thomas Barkin, Federal Reserve Bank of Richmond President, discusses the current state of the economy, the Fed's stance on interest rates, balancing risks of employment and inflation, hiring trends, credit stress, and assessing risks in commercial real estate.
The labor market stability is demonstrated by the decrease in jobless claims, indicating that workers are still being retained by companies.
Decisions on interest rates should be based on observed economic reactions to rates rather than striving to hit a theoretical neutral rate, which varies in estimation.
Deep dives
Strong Jobless Claims and Labor Market Stability
The recent jobless claims data show that 218,000 claims were reported last month, indicating a decrease from the previous week. This suggests that workers are still being retained by companies, demonstrating labor market stability. Additionally, there have been positive trends in job openings and payroll data, reflecting overall favorable economic conditions.
Assessing the Economy's Strength and the Neutral Rate
The podcast episode highlights the remarkable performance of the economy, with indicators such as a 3.3% GDP growth in the fourth quarter and strong job numbers. However, the guest speaker cautions against overly relying on data from a single month due to seasonal adjustments and the potential for one-off factors. They also discuss the concept of the neutral rate, indicating that estimates vary, but decisions should be based on observed economic reactions to rates rather than striving to hit a theoretical neutral rate.
Inflation, Interest Rates, and the Fed's Decision-making
The conversation delves into inflation trends, with recent data showing core inflation at 1.9%, which aligns with the Fed's target. However, there is consideration for the potential resurgence of inflation later in the year. The guest, a representative from the Richmond Fed, emphasizes the need to balance risks to both employment and inflation. They share the cautious approach in making rate cuts, aiming for sustained progress and assessing broad economic trends rather than relying solely on specific metrics.
Federal Reserve Bank of Richmond President Thomas Barkin reiterated policymakers have time to be patient about the timing of rate cuts, pointing to a strong labor market and continued disinflation. He speaks with Bloomberg's Jon Ferro, Lisa Abramowicz, Annmarie Hordern and Michael McKee.