Richmond Federal Reserve President and CEO Tom Barkin

Episode Summary

Executive Summary: Barry Ritholtz interviews Richmond Fed President Tom Barkin about his unconventional path from Harvard and McKinsey to the FOMC, the Fed’s role in a volatile post-pandemic economy, and the outlook for inflation, rates, housing, labor, and tariffs. Barkin argues the economy is still fundamentally solid but clouded by uncertainty, so the Fed should stay modestly restrictive and patient while watching real-world business behavior.

Main Topics: Barkin’s career path and how private-sector experience translates to the Fed (Priority: 5/5): Barkin explains how economics, law, business school, and 30 years at McKinsey shaped his perspective. He says his value at the Fed comes from understanding what businesses are doing on the ground and bringing practical risk-management and operations experience to the institution. Volatility, uncertainty, and the post-2018 economic regime (Priority: 5/5): He reflects on how unusual the last several years have been: rate changes, the pandemic, inflation, and tariff-driven uncertainty. Barkin suggests the prior decade was an unusually low-volatility period and current turbulence may be closer to normal than people think. Inflation, expectations, and the Fed’s 2% target (Priority: 5/5): Barkin defends inflation expectations as economically powerful but imperfectly measured. He argues the 2% target remains sensible, globally accepted, and not worth changing, while cautioning against false precision in monthly inflation readings. Richmond Fed district and the importance of field work (Priority: 4/5): He describes the Richmond district as a mix of fast-growing metro areas, DC’s unique economy, and rural communities. Barkin says visiting businesses and towns throughout the district helps him spot turning points and understand data more deeply. Labor markets, wages, and post-pandemic structural changes (Priority: 4/5): Barkin says wage gains have been strongest at the lower end of the income spectrum but inflation has offset much of the benefit. He also highlights persistent labor shortages in skilled trades, care jobs, and local government, especially in smaller towns. Housing, remote work, and commercial real estate adjustment (Priority: 4/5): Remote work has changed how people value homes and offices, raising demand for housing while leaving commercial real estate mid-adjustment. Barkin says the housing shortage is mainly a supply problem driven by zoning, permitting, land constraints, and local resistance to growth. Monetary policy stance and the outlook for rate cuts (Priority: 5/5): Barkin says policy is currently modestly restrictive, with inflation still above target and unemployment low. He favors waiting for clearer evidence before easing, emphasizing humility, conviction, and the Fed’s need to avoid overconfidence in forecasts.

Key Arguments: Barkin’s private-sector background gives him a differentiated skill at the FOMC: reading how businesses actually respond to uncertainty, pricing pressure, and tariffs. The last several years of volatility are not necessarily aberrations; the long stable expansion of the 2010s may have been unusually calm rather than the norm. Inflation expectations matter a lot because they shape pricing and wage decisions, but current measurement tools for expectations are noisy and imperfect. The 2% inflation target remains useful because it anchors credibility, avoids deflation risk, and is already the de facto global standard. Economic sentiment can be much worse than the data; businesses may pull back during uncertainty even when headline indicators remain strong. On housing, simply cutting rates will not solve shortages because most homeowners would be both buyers and sellers; the real fix is increasing supply. The Fed should remain patient because inflation is near target but not fully there, unemployment is still low, and the policy forecast is unusually unclear. The best way to understand the economy is to combine hard data with field intelligence from businesses and local communities. The post-pandemic inflation surge was caused by a mix of excess demand, supply constraints, labor shortages, and behavioral repricing after a shock. Monetary policy works best with both conviction and humility: act decisively when needed, but avoid false precision and overconfidence in forecasting.

Data Points: Harvard degrees: 3 degrees - Barkin earned a bachelor's, MBA, and JD from Harvard. McKinsey tenure: 30 years - He worked at McKinsey for three decades before joining the Fed. Richmond Fed start: 2018 - Barkin joined the Richmond Federal Reserve in 2018. Atlanta Fed board tenure: 2009-2014 - He served on the Atlanta Fed board and later chaired it. FOMC members: 19 people - Barkin describes the FOMC room as highly impressive and economist-heavy. Academic economists on FOMC: about two-thirds - He says roughly two-thirds of FOMC members are academic economists. Fed funds rate: 4.3% overnight rate - Barkin describes current policy as modestly restrictive. Unemployment rate: 4.2% - He cites this as historically low. Headline inflation: 2.3% - He says inflation is close to the 2% target. GDP growth: 2.5% range - He cites adjusted first-quarter growth as still solid. 2010s inflation: 1% to 2% every cycle - He says inflation stayed in this range throughout the decade. 2010s jobs growth: every month - He notes jobs were added every month in the 2010s. 2010s GDP growth: 2% to 3% - He characterizes the decade’s growth as stable and narrow. 15-year rolling asset-return period: 16% annually - He references an internal study showing the post-financial-crisis 15-year period was the third-best on record. Prior comparable 15-year periods: 18% and 17% annually - He compares the 15-year period ending last year to earlier postwar and pre-2000 periods. Interest rate changes during Atlanta Fed board tenure: none - He jokes that rates did not change once during 2009-2014. Wage distribution: higher gains at the lower end - He says wage gains were stronger for lower-income earners after the pandemic. Mortgage rate share: 60-70% under 5% - He cites the share of homeowners with mortgages below 5% as a reason people are reluctant to move. Mortgage rate share: huge number under 4% - He emphasizes how many homeowners are locked into very low mortgage rates. District geography: 6 states plus DC - The Richmond Fed district covers South Carolina, North Carolina, Virginia, Washington DC, West Virginia, and Maryland. Podcast cadence: 5 days a week - Barkin says he spends five days a week in the market talking to businesses.

Pivotal Quotes: "I think there's today and tomorrow. Today, we're in the closing stages of bringing the economy back to normal." — Tom Barkin: On the current state of the economy and why the Fed is not rushing to ease policy. "I describe it as trying to drive through a really dense fog." — Tom Barkin: On how businesses are reacting to tariff and policy uncertainty. "The cure for high prices is high prices." — Tom Barkin: On how price increases eventually reduce demand and attract supply responses.

Implications: Listeners should expect a cautious Fed that sees the economy as solid but not settled. For businesses and households, uncertainty, tariffs, housing supply constraints, and inflation expectations remain key forces shaping spending, hiring, and rate decisions.