Odd Lots Summary: Tom Barkin on Why Central Banking Is on Hard Mode Now

Podcast: Odd Lots by Bloomberg
Episode Date: August 25, 2025
Guests: Tom Barkin (Richmond Fed President)
Hosts: Joe Weisenthal, Tracy Alloway

Episode Overview

This episode, recorded at the Jackson Hole economic symposium, features Richmond Fed President Tom Barkin discussing why central banking is especially challenging (“hard mode”) in the current economic climate. The hosts and Barkin examine the unusually complex tradeoffs and uncertainties that central bankers face regarding inflation, labor markets, and economic growth. They also dig into the impact of tariffs, the durability of inflation, consumer psychology, Fed independence, and regional economic issues, especially those relating to North Carolina and trade policy.

Key Discussion Points & Insights

1. Interpreting the Economic Data and Labor Market Ambiguity

• Uncertainty in Economic Signals: Barkin emphasizes persistent confusion and lack of clarity in key indicators driving Fed decisions.
  • Quote: “I’ve been saying I’m confused about everything. I'm confused about the labor market and the inflation side.” (02:59, Barkin)
• Labor Market Anomalies:
  • Businesses report little hiring or firing, with job growth numbers now revising sharply down, which seems more realistic given these anecdotes.
  • Concern: If job growth runs near zero, it changes the calculation of economic health despite a still-low unemployment rate (4.2%).
  • Demographics and migration heavily influence labor trends; baby boomers are retiring and immigration has slowed.
• Data Revision and Confidence:
  Barkin expects further downward revisions, amplifying uncertainty: “If you're dealing with 130,000 job market, that's a very different level of confidence than if you're dealing with a 35,000 or even, maybe even a 0 job growth market.” (04:33, Barkin)

2. Fed Policy and Chair Powell’s Jackson Hole Speech

• How Dovish Was Powell Really?
  • Markets interpreted Powell’s Jackson Hole speech as dovish; Barkin saw it as "down the middle." (06:45)
    • Quote: “It seemed like a perfectly down the middle speech to me. ... It seemed like they [markets] read it as more dovish than I heard it. But what do I know?” (06:59, Barkin)
  • Powell emphasized the labor market, focusing attention on one part of the Fed's dual mandate.
• The Difficulty of Today’s Monetary Policy:
  Barkin states that policy is only hard “when you have risk on the inflation side and risk on the employment side,” unlike more straightforward times. (05:40)
  • Quote: “Monetary policy is really easy three quarters of the time... but if you’re going to have risk on the inflation side and risk on the employment side, that’s when it gets hard.” (05:19, Barkin)

3. The ‘Fog’ Analogy and the Lifting of Uncertainty

• Transition from Uncertainty Towards Cautious Optimism:
  Barkin likens recent economic decision-making to “driving in the fog,” but says the “fog is lifting” as tariff, tax, immigration and deregulation boundaries become clearer.
  • Quote: "When you’re driving in the fog, it’s hard to put your foot on the gas… But what I’ve been saying the last month is I think the fog is lifting.” (08:51, Barkin)
• Consumers Are Driving Momentum:
  • Significant uptick in consumer spending starting late June and into July, per credit card data and business anecdotes.
  • Businesses remain cautious, relying on attrition rather than layoffs; few are aggressively expanding.

4. Inflation: Persistence and Drivers

• Sticky Inflation:
  • Barkin cautions that bringing inflation down to 2% takes time, recalling that after the Volcker shock, inflation drifted lower over many years, not months.
    • Quote: “People don’t just immediately go back to the old number. …There’s some stickiness to it.” (12:45, Barkin)
• Tariffs and Pricing Behavior:
  • Tariff effects trickle into prices slowly. Not all companies are directly impacted, but many still use the narrative as cover to raise prices.
  • Companies and consumers both "learned" from high inflation, potentially affecting price and wage behaviors going forward.
    • Quote: “This company that's learned how to pass on prices is going to meet a consumer who's ready to resist it.” (24:32, Barkin)
• Why Rate Cut Conversations Persist:
  • With unemployment low but possibly creeping up, and inflation above target but not surging, the Fed’s calibration is difficult. The “neutral” rate is ambiguous.

5. The North Carolina Example: Regional Dynamics and Tariffs

• Tariff Headlines and Real Impact:
  • The Carolinas have seen both heavy job losses (e.g., in textiles, furniture) and robust growth thanks to international and high-value manufacturing.
  • Effect of tariffs varies widely by sector and supply chain exposure.
    • Quote: “It’s very, very dependent on where you sit.” (19:10, Barkin)
• Tariffs and Job Return Skepticism:
  • Barkin doubts that even high tariffs will reverse outsourcing trends due to workforce supply and economic realities.
    • Quote: “I don't know the level of tariff that one would need to get to to bring those jobs back, but it's a pretty significant number.” (20:13, Barkin)
  • Generational skepticism: younger workers hesitate to go into fields their parents lost jobs in, highlighting the need for job stability alongside job creation.

6. Fed Independence in an Increased Political Climate

• The Value of an Independent Central Bank:
  • Barkin strongly defends Fed independence as essential to fighting inflation.
    • Quote: "An independent central bank is the answer to that question. The research is very powerful.” (22:15, Barkin)
  • He hopes the U.S. will recognize the need for an apolitical Fed: “I hope, and I expect that this country is going to recognize [that]…” (22:45, Barkin)

7. Evaluating Policy Restrictiveness and Transmission

• Are Rates Still Restrictive?
  • Despite “restrictive” rates, asset prices (stocks, credit spreads) remain elevated, complicating the policy transmission narrative.
  • Barkin suggests using “nominal consumption” as a practical, observable metric.
    • Quote: “That nominal consumption is a great way to look at it because it just says what’s happening in rates to what people are doing in the economy.” (25:19, Barkin)

8. Electricity Prices, Infrastructure, and Local Concerns

• Emerging Corporate Concerns:
  • Barkin notes growing business anxiety over electricity supply, particularly with AI and data center growth, although consumer price impacts haven’t surfaced significantly yet.

9. Atmosphere at Jackson Hole

• Stable But Valuable Gatherings:
  • Barkin’s eighth Jackson Hole symposium; he notes that the vibe is similar each year, but values the turnover in attendees for new ideas and perspectives. (27:27+)

Notable Quotes & Moments (with Timestamps)

• On the Difficulty of Current Central Banking:
  “Monetary policy is really easy three quarters of the time… but if you’re going to have risk on the inflation side and risk on the employment side, that’s when it gets hard.” (05:19, Barkin)

• On Interpreting Powell’s Speech:
  "It seemed like a perfectly down the middle speech to me. ... It seemed like they read it as more dovish than I heard it. But what do I know?" (06:59, Barkin)

• On the Lifting ‘Fog’:
  "But what I've been saying the last month is I think the fog is lifting." (08:57, Barkin)

• On Tariffs’ Impact Varying Locally:
  “It’s very, very dependent on where you sit.” (19:10, Barkin)

• On Why Inflation Is Slow to Fall:
  “There’s some stickiness to it. … inflation numbers… have gone from seven at their peak down to somewhere in the high twos… I think that’s one piece of it actual just, it’s sticky, it takes a while.” (12:45-13:19, Barkin)

• On Learned Inflation Behaviors:
  “This company that's now learned how to pass on prices is going to meet a consumer who's ready to resist it.” (24:32, Barkin)

• Defending Fed Independence:
  "An independent central bank is the answer to that question. The research is very powerful." (22:15, Barkin)

Timestamps for Key Segments

| Time | Segment/Topic | |-----------|-------------------------------------------------------------------| | 02:29 | Introduction of Tom Barkin & setup for Fed/labor/inflation debate | | 04:33 | Labor market revisions, demographic changes influencing jobs | | 05:19 | Policy is "hard mode" when both mandates (jobs/inflation) are at risk | | 06:45 | Barkin's take on Powell’s Jackson Hole speech | | 08:51 | "Driving in the fog" analogy and signs of fog lifting | | 11:13 | Consumer spending resurgence, possible economic reacceleration | | 12:18 | The stickiness of inflation and role of tariffs | | 14:41 | What caused post-pandemic disinflation: Fed or supply chains? | | 17:54 | North Carolina manufacturing, tariffs, and economic complexity | | 19:34 | Trump’s proposed furniture tariffs, structural issues in workforce| | 21:10 | Discussion of Fed independence and political pressures | | 23:26 | Companies/consumers “learning” inflation & price-setting dynamics | | 24:49 | Are financial conditions still restrictive? Benchmark rate debate | | 26:25 | Electricity prices and infrastructure strain concerns | | 27:27 | Jackson Hole 'vibes' and value of the symposium |

Final Reflection from Hosts

At the end, Tracy Alloway and Joe Weisenthal reflect on:

• The recurring themes of uncertainty and complication at Jackson Hole (“complication and uncertainty are the big buzzwords” 29:11, Alloway).
• Barkin’s “driving in the fog” analogy and central banking being easy “three-quarters of the time” – except now, during stagflation-like ambiguity.
• Difference between market perceptions and Fed officials’ views, especially regarding Powell’s speech.

Tone & Language

• The episode maintains the accessible but knowledgeable style of Odd Lots: conversational, analytical, and laced with metaphor (“driving in the fog,” “hard mode”).
• Barkin is frank, practical, and refrains from oversimplifying, repeatedly returning to anecdotes from his regional tours.

For Listeners Who Haven’t Tuned In

This episode is essential for understanding current central banking dilemmas: the difficulty of balancing jobs and inflation in a changing, uncertain world; the slow fade of inflation; the uneven realities of trade policy; and the subtle shifts in consumer, business, and policymaker psychology driving monetary decisions in 2025. Barkin’s regional perspective and real-world anecdotes highlight complexities often missing from high-level commentary.

Skip advertisements; key content is between [02:29] and [28:10], with introductory and reflective commentary bracketing the substantive discussion.