Federal Reserve Bank of Richmond President Barkin:
- My instinct on auto tariffs is that the top line number will not be the increase that is faced by consumers given competition, exchange rates, other issues
- Auto companies will face challenges in passing tariffs through to consumers, given competition in market-relative prices will matter a lot
- Companies may find themselves with less pricing power than they might have otherwise thought
- Firms will have a difficult choice of raising prices and losing volume or not raising prices and having margins squeezed
- The inflationary risk of tariffs is obvious, but there may also be labor market risk if firms have to cut costs
- Dampened business demand would most likely be seen in capital spending and hiring
- Not as confident that lowered sentiment will change consumer spending, not yet seeing it in credit card data
- Understand the argument that tariffs would involve a one time shift in price level, but will be watching carefully for things like how businesses and consumers react
- Do not start with the assumption that this will Inovlve a one time change in prices
Barkin spoke earlier:
The Federal Open Market Committee (FOMC) appears to be on hold for a good while to come while officials, like Barkin and his colleagues, figure out the impact of the new policies.
This article was written by Eamonn Sheridan at www.forexlive.com.
