Although today’s economy is healthy, the future is uncertain. That was the message from a bank CEO to attendees of a regional Chamber of Commerce members’ breakfast Tuesday at the Berry Hill Resort & Conference Center.
Tom Barkin, President and CEO of the Federal Reserve Bank of Richmond, was the guest speaker, sharing his views on today’s economy, inflation and creating a workforce marketable work in today’s world.
A local bank president, Dexter Gilliam, who is president, CEO and president of the Bank of Charlotte County as well as mayor of the city of Halifax, introduced Barkin and thanked him for his visit to the county. from Halifax.
“Tom, on behalf of this region of the Commonwealth, thank you for taking the time to visit and meet with us during these difficult times, and we look forward to your conversation,” Gilliam said.
In addition to leading the Federal Reserve Bank of Richmond, Barkin serves on the Fed’s top monetary policy arm and is also responsible for the Federal Reserve’s banking supervision and technology organization for the district, Gilliam shared with the members of the chamber.
Barkin gave a cautiously optimistic outlook on the economy as a whole, noting that consumer finances are healthy and spending is up, but the future is uncertain and inflation will need to be brought under control to bring the economy back to normal. a more “normal” state.
“Consumer spending is about 2/3 of the economy and that’s pretty healthy. Household balance sheets and bank balance sheets look healthy,” Barkin said, sharing good news with members of the Chamber of Commerce. “The unemployment rate is still historically low – 3.6%.”
Barkin noted that banks also had a “historic level” of fiscal support during COVID-19.
“Economic data today looks healthy, but tomorrow is still unclear,” Barkin warned. “Markets are skittish and forecasters are predicting that rates will rise further from what they did in the last (recession) cycle,” Barkin explained. “We are afraid of what else could happen to us. We had the shutdowns in China and the war in Ukraine.
Because of that uncertainty, Barkin said the most recent consumer surveys are as low as they have been since the Great Recession. Barkin sees controlling inflation as a realistic achievement and one that will be the key to a more stable economy.
“We’re going to do what it takes to get inflation under control,” Barkin said. “If there’s one lesson we’ve learned over the past year, it’s that everyone hates inflation. They hate inflation because it creates uncertainty. It’s exhausting. Inflation just seems unfair.
Barkin said he sees inflation falling at three different levels, the first being demand. Rising interest rates will lower demand, which in turn will lower inflation. The bank’s president said he also expected stabilizing the supply chain to reduce inflation, and the war between Russia and Ukraine, which would impact oil and commodity prices. food, would also be a factor in the inflation rate.
Barkin also discussed the challenge of creating a marketable workforce in today’s world and the competition between small towns to attract this workforce fueled by the migration of workers out of urban areas during the COVID-19 pandemic.
“The pandemic triggered a lot of thinking about where people wanted to live,” Barkin explained. “People have started to move away from urban areas, and this is an opportunity for small towns. But every small town is in competition with every other small town.
Barkin said he thinks three things are essential for small towns to attract a competitive workforce: having “basic amenities” like a good restaurant, places to shop, and entertainment venues like movie theaters. , having access to high-speed internet with many workers opting to work remotely, and affordable housing options that meet the needs of remote workers.
After his speech, Barkin also had a question-and-answer session with audience members.
One of the questions posed by South Boston City Manager Tom Raab was what would happen if the U.S. dollar were no longer the standard currency used to purchase oil around the world, but instead Chinese currency.
“If oil started to be priced in the international basket, prices would be more volatile,” Barkin replied. He added that the US dollar has remained the world’s oil buying currency because “every alternative currency has done worse than the US dollar,” but on the other hand, the rest of the world, including the ” friends” of the United States, is increasingly unhappy that the dollar is the currency for buying oil.
Barkin also made remarks on the subject of cryptocurrency during his speech. He said he doesn’t see the use of cryptocurrency as long-term because it’s not backed by the “full faith” of the government and the only time he can think of cryptocurrency. currency is viable is if everyone in the world starts using it.
Another audience member asked about rising interest rates creating a “negative psyche” among consumers. Barkin replied that the current interest rates – a long-term rate of 3% and a short-term rate of 1.6% – are still low, but as people have become accustomed to extremely low interest rates during the pandemic, consumers are ‘backing off’ now that interest rates are rising even though they are not as high as they have been in the past.
“Let’s get inflation under control,” Barkin reiterated. “Hopefully we can do that at an interest rate level that’s not too detrimental.”