US FOMC Member Barkin Speaks

FED'S BARKIN: SOME AI-RELATED ITEMS ARE SHOWING INFLATIONARY PRESSURE ... Fed's Barkin: AI investment is putting pressure on the neutral rate

Thank you for that kind introduction, and for inviting me to join you today. I'd like to share my perspectives on the U.S. economy — where we are now, and whether we are sailing toward calmer seas or into more turbulent waters. These are my thoughts alone and not those of anyone else on the Federal Open Market Committee or in the Federal Reserve System. Over the last several years, the U.S. economy has faced wave after wave of supply shocks. Every time one wave recedes, we’re hit with another: the COVID-19 pandemic, the Russian invasion of Ukraine, the collapse of Silicon Valley Bank, the tariff tumult, and most recently, the conflict in the Middle East. We’ve seen smaller ripples, too: a ship lodged in a major trade route, bird flu, factory fires, government shutdowns, ice storms and more. These shocks affect the available supply of goods and services: too little energy, no chips for cars, tighter credit, not enough wheat. After the pandemic, we even saw supply challenges with labor. Typically, these shocks result in higher prices for a time and, in turn, a pullback in demand. Let me focus on the latest wave: the conflict in the Middle East. While it’s rocked the boat, it’s done so less than one might have imagined. We’ve all seen the price jump at the gas pump. I’m also hearing of fuel surcharges, rising airfares, freight and packaging costs, as well as availability issues with key inputs like fertilizer and aluminum. We can see these higher costs — especially energy — in the recent inflation data. Headline PCE jumped up to 3.5 percent year–over–year in March 2026. Core inflation, which excludes food and energy, increased more modestly to 3.2 percent. The impact is much less noticeable in demand. Consumer spending is up, and not just due to ever more expensive gasoline. Non-gas spending growth has remained solid, too. Corporate profits are high. Artificial intelligence (AI) investment contin RICHMOND FED'S BARKIN/RALEIGH: 'WOULDN'T BE SURPRISED 'TO SEE ADDITIONAL PRESSURE ON JOBS OR INFLATION 'OR CONCEIVABLY BOTH' RICHMOND FED'S BARKIN/RALEIGH: 'WOULDN'T BE SURPRISED 'TO SEE ADDITIONAL PRESSURE ON JOBS OR INFLATION 'OR CONCEIVABLY BOTH' Fed's Barkin: The policy of looking through supply shocks has worked well in the past, but it is easy to see more challenging conditions and more frequent shocks in the future.

Thanks for that kind introduction. I thought today I would give you my perspectives on the U.S. economy. These views are mine alone, and not those of anyone else on the Federal Open Market Committee (FOMC) or in the Federal Reserve System. A year ago today, I stood before a group like this one and described navigating last year’s economy as trying to drive through fog. Major government policy changes — trade, immigration, regulation, and fiscal — were all happening at once. It was hard to see the path ahead. Businesses reacted as you would think. When you drive through fog, you don’t want to put your foot on the gas; you don’t know what lies around the next turn. You also don’t want to slam on the brakes; someone could hit you from behind. So, you pull over, and put on your hazards. That’s what businesses did. They didn’t cut back, but they didn’t lean into new investments either. They didn’t fire, but they didn’t hire. They sat on the side of the road, waiting for the fog to lift. The Fog Lingers Now, most of last year’s policy questions seem much clearer. The tax bill has passed. Deregulatory efforts are underway. Net migration has plummeted. Federal government spending and workforce cuts are largely understood. Even though the recent Supreme Court tariff ruling has reintroduced some uncertainty, most businesses expect tariffs to be reinstated in a range they can roughly predict. But I can’t stand here a year later and tell you the fog has lifted. If anything, it’s deepened and spread. It’s as if we’ve all moved to San Francisco. Speaking of the Bay Area, BARKIN: PRUDENT TO HOLD INTEREST RATES STEADY AND AWAIT MORE CLARITY ON WHAT THE FED SHOULD DO NEXT FED'S BARKIN: EVEN BEFORE OIL SHOCK, PROGRESS ON INFLATION WAS AT RISK OF STALLING #OOTT Fed's Barkin: I will be watching inflation and expectations data carefully. FED'S BARKIN STATED UNEMPLOYMENT IS LOW, BUT THE LABOR MARKET SEEMS 'FRAGILE'; COMPANIES REPORT MINIMAL WAGE PRESSURE WITH SEVERAL APPLICANTS FOR EVERY POSITION.

Federal Reserve Bank of Richmond President Thomas Barkin addressed the impact of artificial intelligence on the labor market during a panel discussion on Wednesday. The banker stressed that the Fed's monetary policy cannot resolve AI-driven business volatility. Barkin cautioned against the immediate assumption that AI will lead to widespread worker displacement, going on to explain that technology would provide opportunities for workers to move to higher-skilled tasks.

Fed's Barkin: Clear Sense That Job Market Has Loosened - Hard To Calibrate What's Going On With Labor Supply - Inflation Data Has Been Consistently Above Target - Firms Say They Have Very Limited Pricing Power - Seeing Disinflation Across The Economy, But Wants More Confirmation… FED'S BARKIN: FIRMS SAY THEY HAVE VERY LIMITED PRICING POWER FED'S BARKIN: EXPECTS LATEST TARIFF MOVES WON'T CHANGE INFLATION DYNAMICS THAT MUCH FED'S BARKIN SAYS THE CORE FACTORS FAVOR THE CONSUMER SECTOR AND DRIVE DEMAND FED'S BARKIN SAYS A REDUCTION IN ARTIFICIAL INTELLIGENCE INVESTMENT COULD NEGATIVELY AFFECT THE ECONOMY ...

BARKIN: FED IS FACING A DIFFERENT QUESTION NOW, WITH INFLATION ABOVE TARGET, THAN THE GREENSPAN-LED FED DID IN THE 1990S FED'S BARKIN SAYS HE IS VERY FRIENDLY TO THE NOTION THAT INFLATION MIGHT COME DOWN, BUT LOOKING TO SEE IT FED'S BARKIN SAYS HE IS CONCERNED ABOUT RISKS TO EMPLOYMENT AND INFLATION - FED'S POLICY RATE IS NOW AT HIGHER END OF ESTIMATES OF NEUTRAL - HE HEARS OVERWHELMINGLY FROM COMPANIES THAT DEMAND IS FINE, NOT 'FROTHY' FED'S BARKIN: PRODUCTIVITY IS COMING NOT JUST FROM ARTIFICIAL INTELLIGENCE, BUT FROM COMPANIES WANTING TO LIMIT HIRING, ADAPTING TO PAST LABOR SHORTAGES - HE DOES NOT KNOW WARSH WELL, BUT THAT FED CHAIR NOMINEE SEEMS CAPABLE AND CHARISMATIC Fed's Barkin: I will do the job Congress set for me, and I trust that is what the new Fed chair will do as well.