Richmond Fed President Tom Barkin Talks Iran War

Summary

Bloomberg Talks – Richmond Fed President Tom Barkin Talks Iran War

Air Date: March 5, 2026
Host: Bloomberg (Mike McKay, Michael McKee, Economist Analyst)
Guest: Tom Barkin, President of the Richmond Federal Reserve

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Overview

This episode features an in-depth interview with Richmond Fed President Tom Barkin amidst new economic data releases and the breaking news of war involving Iran. The discussion explores the interplay between current labor market dynamics, inflation, oil price shocks, productivity trends, and the potential implications for monetary policy and Federal Reserve governance.

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Key Discussion Points & Insights

1. Latest Economic Data & Labor Market Trends

Timestamps: 00:38 – 02:53

• Initial jobless claims remain very low (213K), indicating ongoing labor market resilience, even as continuing claims rise slightly (from 1.82M to 1.868M), raising questions about hiring slowdowns (01:01).
• Productivity rose 2.8% in Q4, a strong number historically, though down from last quarter's 5.2% (01:54).
• Barkin frames recent productivity gains as a positive outcome of firms adapting to labor shortages by investing in technology and new staffing models:

  “2.8% on a last 10 or 20 or 30 year basis is a really good number. ... You were caught short workers three years ago, you invested in new processes, new staffing models, automation, and people are seeing the results today.” – Tom Barkin [02:53]

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2. The Iran War & Oil Price Shock

Timestamps: 03:30 – 04:44

• Barkin emphasizes uncertainty regarding the Iran conflict’s duration and effects:

  “Don’t have any sense on how long it’s going to take or what the implications are going to be.” – Tom Barkin [03:45]

• Even though the US is not a net oil importer, gasoline prices at the pump play an outsized role in consumer sentiment and spending, and their recent jump is being closely watched.

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3. Implications for Fed Policy – Rate Cuts, Inflation, and Productivity

Timestamps: 04:12 – 06:58

• Historical context: The host draws comparisons to the 1970s oil shock and resulting Fed mistakes.
• Barkin underscores a “meeting by meeting” policy approach and draws a distinction between temporary and lasting oil shocks:

  “Textbook monetary policy would be you look through a short term shock but you don’t look through a long term shock...” – Tom Barkin [04:27]

• Businesses report “limited pricing power” and see consumers pushing back against higher prices, suggesting we’re on the “backside” of this inflationary period—yet recent high inflation data have “put pause to any conclusion that we’re done fighting this.” – Barkin [05:06]
• Productivity is credited with allowing businesses to absorb input cost increases without passing them along:

  “Corporate margins are quite healthy. Earnings were up...13% fourth quarter... That’s because productivity has allowed people to absorb these hits without... having to pass it on fully in prices.” – Tom Barkin [06:12]

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4. Labor Market Outlook

Timestamps: 06:58 – 08:07

• The labor market is described as “pretty open, maybe even loose,” with availability high and turnover low.
• Barkin’s anecdote: Even in traditionally difficult sectors (e.g., poultry processing), labor shortages have eased:

  “If you can replace poultry workers, I think you’ve got a reasonably open job market.” – Tom Barkin [07:06]

• Recent data is “reassuring”—low claims and falling unemployment signal underlying strength.

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5. Risks: Balancing Inflation and Employment

Timestamps: 08:01 – 08:20

• Barkin says the risks to inflation and employment have become more balanced compared to last year, when inflation risks dominated.

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6. Current Stance of Monetary Policy

Timestamps: 08:20 – 09:13

• Policy remains “modestly restrictive”—enough to help grind down the last mile of inflation, but not highly restrictive since demand remains robust.
• Barkin notes the surprising strength and persistence of demand despite past rate hikes.

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7. Changing of the Guard – New Fed Chair Kevin Warsh

Timestamps: 09:13 – 10:43

• Barkin reflects positively on working with new chair nominee Kevin Warsh and describes the collaborative and sometimes opinionated nature of FOMC decision making.
• Warsh is expected to advocate for a smaller Fed balance sheet, which Barkin sees as “instinctively... an attractive idea” provided policy operations remain smooth.

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8. Communication Strategy and Outreach

Timestamps: 10:43 – 12:11

• Warsh is reportedly interested in a more unified Fed communication approach, possibly limiting individual commentary.
• Barkin values his active district engagement and sees it as building public trust:

  “I take a lot of pride in how much interaction and engagement I have across my five states and District of Columbia... I’m not trying to talk about how many rate cuts I have in my S and P for the next nine months, I'm trying to talk about here's how I see the economy and ask them how are you seeing the economy?” – Tom Barkin [11:31]

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9. Jay Powell’s Legacy

Timestamp: 12:11 – 12:24

• Asked if he’d like Jay Powell to stay as a Fed governor, Barkin demurs with warmth:

  “I like Jay a ton. I think he’s done a spectacular job and I want Jay to do absolutely the best thing for Jay.” – Tom Barkin [12:18]

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Notable Quotes & Memorable Moments

• “You look through a short-term shock but you don’t look through a long-term shock.” – Tom Barkin [04:27]
• “Consumers are exhausted by inflation... you do have a sense that we’re on the backside of this inflationary period...” – Tom Barkin [05:06]
• “I take a lot of pride in... engagement I have across my five states and District of Columbia... putting a face on the Fed.” – Tom Barkin [11:31]

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Analyst & Host Recap

Timestamps: 12:38 – 13:43

• Analysts highlight Barkin’s balanced monetary stance, acknowledgment of the Fed’s dual mandate, and his wariness to draw conclusions ahead of further inflation data.
• Emphasis on the uncertainty created by the Iran war and oil prices, with market and policy responses hinging on the shock’s duration.

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Summary Table: Important Segments

| Timestamp | Segment/Topic | |-----------|----------------------------------------------------| | 00:38 | Jobless claims & labor market overview | | 02:53 | Tom Barkin on productivity & labor investment | | 03:30 | Iran war & oil prices implications | | 04:27 | Navigating rate policy & pricing power | | 06:12 | Business pricing power & productivity’s role | | 07:06 | Labor market anecdotes & conditions | | 09:13 | New Fed chair, Warsh’s approach | | 10:58 | Barkin on Fed outreach & communication | | 12:18 | Powell’s legacy & succession question |

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For Listeners

This episode dives deeply into the Federal Reserve’s real-time reactions to a volatile global and domestic environment, balancing caution and optimism while highlighting the persistent role of productivity, price sensitivity, and resilience in both businesses and consumers. Tom Barkin’s candid, measured responses offer clarity on how Fed policy is evolving amidst geopolitical and economic uncertainty.

Transcript

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[Michael McKee]

let's turn to the data. Jobless claims coming in at a nice 213 against an estimate of 215 and the previous number of 212. Lisa jobless claims and continuing claims speak to the same thing we've been talking about for quite a while. Low hire, low fire, low fire captured in jobless claims. Initial claims being very low, late low, higher captured in some very sticky high continuing claims.

[Economist Analyst]

Yeah, and if you take a look at the initial claims four week moving average, it actually has gone lower from 220,000 in the week before to 215,000 essentially with this latest data. So highlighting that. But you're right, continuing claims you've got to pay attention to because it actually kicked upward to 18 to 1.868 million, up from 1.82 million. A question here about whether that means that people aren't hiring, whether that's the issue, whether this is just a snafu tied to weather or some other disruption disruption, or whether this really does highlight that maybe initial jobless claims don't really show the pain that people are experiencing under the surface.

[Michael McKee]

This labor market has been frozen for quite a while and this data this morning speaks to the same thing. It's the right kind of downside surprise on initial claims and it's the wrong kind of upside surprise on continuing claims. My Nikkei standing by, he's having a look at the data and he's got a special guest for us as well. Good morning, Mike.

[Mike McKay]

Good morning, John. Well, claims are not the only number out this morning that matters. We're also looking at import prices for the month of January. On a month over month basis, they're up 2.10of a percent after a decline in the prior month. And we're also seeing ex petroleum up 4. 10. That puts kind of a lie to the idea that foreigners are absorbing the tariffs because the prices should go down. If that's the case. Also productivity up 2.8%, which sounds good, except it was up by 5.2% in the third quarter. So not as great a news as perhaps people had Hope. Let's get a read on how the economy is doing. Now you mentioned a special guest and indeed we do have one, Tom Barkin, president of the Richmond Fed. We're here at the Richmond Fed with him. And I know you haven't had a chance to really look at these numbers but in general the low fire, low hire economy and the tariff affected economy seem to be about what they have been.

[Tom Barkin]

Well, it's always good to come on right after a bunch of data comes out. But I wouldn't be as negative on the productivity as you just were. 2.8% on a last 10 or 20 or 30 year basis is a, is a really good number. And I think we are seeing companies invest in productivity and deliver it, some of that technology AI But I think a lot of it is you were caught short workers three years ago, you invested in new processes, new staffing models, automation and people are seeing the results today.

[Mike McKay]

And that holds down inflation.

[Tom Barkin]

It does hold down inflation and it allows people to maintain margins at times when their input costs might be, might be coming up.

[Mike McKay]

Well, input costs are probably going up for people who use petroleum. So I want to start there with obviously the Iran war just started but what's your gut feel about how that's going to impact prices and the economy

[Tom Barkin]

don't have any sense on how long it's going to take or what the implications are going to be. Obviously you watch oil prices. While the US is no longer a net importer, it's still the case that the price at the pump matters a lot in terms of sentiment, in terms of crowding out other spending. And so I'm just watching prices at the pump. They've jumped up over the last week. Week. You can see that when you drive around. But of course no one knows whether this is going to be short term or long term. And so we'll just see where it goes.

[Mike McKay]

Well, back in the 1970s we had the oil price shock and we had gas lines and people were miserable and having to pay all this money. And so the Fed eased into that. That turned out to be a mistake. Does this put on hold ideas for the time being of continuing to cut rates?

[Tom Barkin]

Well, I think we'll go meeting by meeting and we'll see what we see when we get there. You know, gas prices obviously if they're up, that is inflationary text monetary policy would be you look through a short term shock but you don't look through a long term shock. And I think that's a lot of the assessment people are going to have

[Mike McKay]

to make the open Market Committee before the Iran war started. Basically the views seem to be that we're at peak tariffs now and inflation will start to come down in the latter half of the year. But you throw this into the equation. Where would you put yourself in terms of thinking about the progression of inflation and when you might have enough information to decide whether a cut is worthwhile or not?

[Tom Barkin]

Well, we'll have to see how it evolves. If you go back to the fall, the conversations I have with businesses suggest to me that they believe their pricing power is very limited. Consumers are exhausted by inflation affordability. People are pushing back, whether that be not purchasing or private label or trading down to lower priced retailers or repairing rather than replacing. And so in the conversations you have, you do have a sense that we're on the backside of this inflationary period and we'll head back to normal. And the numbers in the fall, absent the government shutdown, we're saying much the same thing I will say over the last month and with the PC numbers that we're expecting next week, you've got a couple of months of relatively high inflation. That certainly puts pause to any conclusion that we're done, you know, fighting this, but we'll, we'll see where we go.

[Mike McKay]

Well, slicing. The business leaders are telling you a little more closely they know consumers are price sensitive and they're worried about that. But are they also in a situation where they've had to absorb too much and if we see more price increases of inputs, they're going to have to raise prices?

[Tom Barkin]

Well, that's where we come back to productivity as being so key to this whole story. Because most every business I talked to last April that got tariffs was going to pass it on. It was just clear and you know, they needed to maintain margins. The consumer was going to have to take it. And when they experimented with that, they got a lot of pushback and so prices didn't increase the way that a lot of those folks expected. Now their margins have been very steady and so corporate margins are quite healthy. Earnings were up, I think 13% fourth quarter year over year. And that's because productivity has allowed people to absorb these hits without, you know, having affect margins and having to pass it on fully in prices. And when you start seeing good productivity numbers over and over and over again, that gives you some hope that can continue.

[Mike McKay]

What are you hearing from businesses about the other side of your mandate? Employment? Obviously we're seeing low, higher, low, fire. Continue.

[Tom Barkin]

Yeah, I have to say the business I talked to when they described the labor market. They describe it as pretty open, maybe even loose. Availability is high, turnover is low. I was with a bunch of poultry processors on the Eastern Shore who told me that even after losing workers, you know, to temporary protected status, they've been able to replace them relatively easily. And if you can replace poultry workers, I think you've got a reasonably open job market. And of course, going back to the fall, that's what we saw as unemployment was ticking up. I will say the last couple of months of employment data has been reassuring. As you've seen, the unemployment rate came down, jobless claims have stayed low. And so you still hear a relatively loose labor market. You still hear people not hiring, but not firing. And. But the numbers are even better than that. I think what you hear.

[Mike McKay]

Well, it sounds like you think at this point the risks to inflation and to employment are roughly balanced.

[Tom Barkin]

Yeah. If you go back to the fall, I think a lot was behind our moves was the sense that the risk of the labor market were up while the risk to inflation were down. The data that's come in over the last couple months, what I think suggest it's moved in the other direction.

[Mike McKay]

Well, you mentioned that, you know, you're going to get probably an elevated PC reading coming up at this point. Is monetary policy set at a place where it can help you bring down inflation or is it even too tight? Where is it on the scale?

[Tom Barkin]

Well, I expect we're still modestly restrictive and that should help as we try to grind out the last mile here. But again, we'll have to see. I definitely take note of the continued strength in demand. And so I don't think we're highly restrictive. If you were highly restrictive, you'd see a lot more impact on demand, which has stayed, you know, very healthy. I was reflecting, it was four years ago that we first started increasing interest rates in March of 22. And if you had predicted then that we would have demand growth of the sort we've had over the last four years, you would have been a severe outlier.

[Mike McKay]

Let's talk about your new boss. Who's coming in, in theory, I guess, Kevin Warsh's nominations finally gone up to Capitol Hill. A lot of people think the Fed chair can walk in and just change interest rates, but they don't. You all have a vote and he's. His basic power is in persuasion. How do you think he'll do? How do you think the dynamics play out in when somebody new comes into the building like that?

[Tom Barkin]

Well, it'll be a new experience for me, too, since Jay was in the building when I started eight years ago. I mean, I like and respect Kevin and I trust he'll do a good job. And I'm looking forward to working with him. You have a lot of smart, opinionated people in the room, and so you'll want to work with those folks. I think there's also a lot of respect for the chair and what the chair does to take a lot of the visible noise that happens from markets and the press and others. And so I think we'll, I look forward to working with him. We'll see where we go.

[Mike McKay]

He makes the case for a number of changes at the Fed, one of which would be a smaller balance sheet. Where do you come down on that?

[Tom Barkin]

I mean, instinctively, I like the idea of the Fed having a smaller footprint in financial markets. I think subject to us still being able to operate monetary policy and control rates well, and subject to not having severe adverse reactions in the markets. But it's a. Instinctively, it's an attractive idea to me if we can find a way to, to make it work in the context of the rest of what we're trying to do.

[Mike McKay]

He's also said he'd like to have a little bit less conversation from Fed officials and maybe more coordinated interactions with the public. What do you think about that? Maybe asking you not to speak as much?

[Tom Barkin]

Well, that would give me some more time, so I'd be happy with that. Now, what I try to do in my outreach is very, very district oriented. And so I was in Martinsburg, West Virginia yesterday. I was in D.C. the day before. I was in Harford County, Maryland last Thursday. I was in Northern Virginia on Tuesday. I was Baltimore on Wednesday. And in each of those places, I'm actually not, you know, talking to you. I'm talking to chambers of commerce and Rotary clubs and people who are interested in what's happening, the economy. And I think there's real value to being in front of these folks and putting a face on the Fed. The design of the Fed was a regional design from the start. And I think part of it was people wanted to trust and understand the people who are making these important decisions and also to feel listened to. And I take a lot of pride in how much interaction and engagement I have across my, you know, five states and District of Columbia. And I hope to continue doing that. But to me it's not. And you know this because we've talked a lot before. I'm not trying to talk about how many rate cuts I have in my S and P For the next nine months, I'm trying to talk about here's how I see the economy and ask them how are you seeing the economy? I think I give valuable insight that way.

[Mike McKay]

One last question. Would you like to see Jay Powell stay on as a Fed governor after his term as chair is up?

[Tom Barkin]

I like Jay a ton. I think he's done a spectacular job and I want Jay to do absolutely the best thing for Jay.

[Michael McKee]

Okay.

[Mike McKay]

Tom Barkin, thank you very much. The president of the Richmond Fed will

[Tom Barkin]

send it back to you, Mike McKay.

[Michael McKee]

Thank you, sir. And that's a top tier for anyone that gets asked that by Mike McKay anytime soon. Just repeat what Tom Barkin just said. I want what's best for Jackie.

[Economist Analyst]

So not going to answer, but I think it was a great answer, frankly. Honestly, what he said was actually passing through the vagaries that the Fed is dealing, dealing with quite well. Talking about how he still sees modestly restrictive policy, not exactly accommodative or neutral. And they did say that companies were having trouble passing along pricing, but that the recent inflationary data does give them pause. So sort of the dual mandate kind of balanced right now he seems like he's kind of want to be waiting on the sidelines for more on inflation,

[Michael McKee]

on the energy shock. It keeps going back to the same thing, the calendar. It depends how long this goes on for it. If it's a short term shock, the textbook says his words, look through it. If it's longer, the textbook says something else. How much longer is it going to be?

[Economist Analyst]

Yeah, and this we don't know. And that I think is going to be a really important driver and frankly not just for the Federal Reserve, but for the entire market to reassess exactly what that impact is. Notable to me that that President Barkin, Richard Fed President Barkin was talking about how it really matters how much oil prices are for sentiment, for consumer sentiment and that that will be potentially a disinflationary force commerce in terms of their ability to keep on going out and buying things.

[Michael McKee]

Michael McKee catching up with the Richmond Fed President Tom Bach in there just moments ago.

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