The Fed: Fed’s Barkin says now might be time for caution

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Federal Reserve Bank of Richmond President Thomas Barkin

Richmond Fed President Thomas Barkin said Wednesday that it might be wise for the central bank to move cautiously given all the uncertainty surrounding the economic outlook.

In an interview on the Fox Business Network, Barkin noted there are “different schools of thought” on the Fed about how to steer policy when the outlook is unclear.

“I think its hard to navigate with uncertainty and there’s different schools of thought about whether one should move faster so that you can get ahead of the uncertainty, or…the higher the uncertainty, the more the caution,” Barkin said, in an interview on the Fox Business Network.

Federal Reserve Chairman Jerome Powell has stressed more than once that “an ounce of prevention is worth a pound of cure” and it was appropriate for the central bank to preemptively cut interest rates.

There is a split on the Fed policy setting committee about the way forward, with some officials wanting the central bank to hold off more interest rate cuts and others calling for a rate cut.

The Richmond Fed president, who is not a voting member of the Fed’s interest-rate-setting committee this year, said he had not made up his mind about what the central bank should do at its next policy meeting at the end of the month.

“There’s a lot of time,” he said. “My posture is very balanced. I’m looking at the data on the economy and I’m looking at the data on uncertainty,” he said.

The Fed has cut rates by a quarter-point at each of its last two meetings.

Barkin said these two moves were “insurance” and the Fed is watching to see what kind of impact they have.

Investor expectations of another rate cut at the Fed’s meeting on Oct. 29-30 spiked Tuesday after a weak report on the nation’s factory sector from the Institute for Supply Management. That has always been a critical indicator of the economy’s health for central bankers.

Read: Fed rate cut in October seen as more likely

Barkin didn’t address the ISM report specifically but said manufacturing has been “weak for some time” and could be in a modest contraction.

Asked about the prospects of a recession, Barkin said he was “very hopeful we’ll see an expansion continue.”

“On the positive side, consumer spending seems to be strong. People have jobs. That’s a very positive thing. Inflation seems to be firming,” Barkin said.

Stocks were broadly weaker for the second straight day after the ISM report. The Dow Jones Industrial Average closed down 494 points to 26,078 while the S&P 500 SPX, -1.79%  fell 52.64 points to 2,887.61.