TODAY. TURN TO THE FED AND THE REACTION TO THE LATEST INFLATION NUMBER AND WHAT'S MEANS FOR THE FED'S TIMELINE FOR CUTS. STEVE LIESMAN HERE WITH A SPECIAL GUEST. >> THANK YOU, CARL. WE HAVE TOM BARKIN HERE FROM THE RICHMOND FED, JUST A SHORT HOP UP FROM RICHMOND TO NEW YORK. THANKS FOR COMING, TOM. >> GREAT TO BE HERE. >> I START WITH YOU, START IN A PLACE I DON'T START WITH MOST FED OFFICIALS. YOU COME MORE FROM THE BUSINESS WORLD THAN THE ECONOMIC AND THEORETICAL WORLD AND YOU'VE BEEN TALKING FOR MANY YEARS NOW ABOUT WHAT I CALL THE CULTURE OF INFLATION. YOUR WHOLE IDEA WAS IT BECAME OKAY IN THE MIDDLE OF A PANDEMIC TO RAISE PRICES, AND YOU'VE BEEN WATCHING THIS TENSION BETWEEN THE COMPANIES, THESELLERS AND THE BUYERS. WHERE ARE WE AT IN YOUR OPINION IN THE ABILITY OF COMPANIES TO PASS ALONG HIGHER PRICES, WHETHER OR NOT IT'S STILL COOL TO DO THAT AND WHETHER OR NOT CONSUMERS ARE FIGHTING BACK? >> IF YOU GO BACK TO BEFORE THE PANDEMIC, PEOPLE THOUGHT AS YOU SAID THEY HAD NO CHANCE. >> NO PRICING POWER. >> MARKET POWER AND ALL THOSE THINGS TO SAY I HAVE NO CHANCE. THE PANDEMIC HIT AND THEY HAD NO CHOICE. SO PEOPLE TOOK A STEP THEY HADN'T BEEN READY TO TAKE, WHICH IS TO INCREASE PRICES. WHEN THEY TOOK THEM UP, THEY DIDN'T FIND ANY CONSEQUENCES. WE LIKE TO THINK WE'RE BACK IN THE NO CHANCE WORLD, BUT PEOPLE ARE STILL SAYING THERE'S NO CRIME, NO CRIME IN TRYING, AND THEY'RE STILL TRYING. I THINK THERE'S A BIG DIFFERENCE BETWEEN GOODS AND SERVICES AND WHEN I TALK TO FOLKS ON THE GOODS SIDE, YOU CAN SEE THIS IN THE NUMBERS, GOOSE PRODUCERS ARE -- GOODS PRODUCERS ARE CONVINCED THEY'RE BACK TO WHERE THEY WERE, HEARING NEWS FROM THE HOME DEPOT AND LOWE'S OF THE WORLD THAT SAYS WE DON'T WANT TO TAKE ANY MORE PRICE INCREASES. COMMODITY COSTS HAVE COME DOWN IN MANY CASES AND THEY DON'T HAVE THE STORY ANYMORE. ON THE SERVICES SIDE I'M STILL HEARING PEOPLE TRYING. I WAS WITH PEST CONTROL COMPANY LAST WEEK WHO SAID, OH, NO, WE DIDN'T TAKE PRICES UP FOR SEVEN YEARS FROM 2015 -- 2013 TO 2020, AND THEN WE TOOK IT UP A BUNCH AND STILL TAKING IT UP. LABOR IS A STORY THAT THEY USE. NOTHING TO DO WITH COSTS. IT HAS SOMETHING TO DO WITH THEY CHANGED THEIR VIEW WITH PRICE ELASTICITY ON THE CUSTOMER SIDE. THEY CHANGED THEIR VIEW AND KEEP TRYING UNTIL CUSTOMERS OR COMPETITORS -- >> WE'RE NOT THERE YET IN YOUR OPINION. >> NOT ON THE SERVICES SIDE. >> ON THE -- >> WHICH -- >> WHICH BRINGS ME RATHER EASILY TO THE INFLATION REPORT YESTERDAY. I DON'T KNOW. I GUESS IN ECONOMICS YOU GET MORE THAN THREE STRIKES BECAUSE IT WAS ONE, TWO, THREE STRIKES YOU'RE OUT THROUGH MARCH. YESTERDAY, DID YOU SEE THAT AS A LITTLE BETTER? ARE WE BACK ON TRACK AS MIKE SANTOLI SUGGESTED? >> I ACTUALLY WAS INTERESTED, EVEN MORE INTERESTED IN THE RETAIL SALES REPORT YESTERDAY, BECAUSE THE CONSUMER SPENDING NUMBERS FOR THE COUPLE MONTHS BEFORE THAT HAD COME IN QUITE STRONG AND STRONGER THAN I WAS HEARING IN THE MARKETPLACE. SO I WAS TESTING MY OWN THINKING. >> RIGHT. >> I THINK WHEN YOU TAKE THE RETAIL SALES OF YESTERDAY AND LOOK AT THE THREE-MONTH NUMBERS YOU SAY THAT'S WHAT I'M HEARING IN THE MARKETPLACE, WHICH IS, GOOD BUT NOT GREAT, CONSUMER SPEND. THAT WAS ONE PIECE OF THE PUZZLE WHICH IS HOW HOT IS DEMAND. ON THE FLAINFLATION SIDE IT CAM OFF THE NUMBERS OF THE PRIOR SIDE, IT'S STILL NOT WHERE WE'RE GETTING TARGET. MOST IMPORTANTLY, I WOULD SAY BACK TO WHERE I WAS GOING, GOODS, YOU KNOW, ZERO TO DEFLATIONARY, SERVICES AND SHELTER INFLATIONARY. YOU LIKE TO IMAGINE THAT MIX WOULD COME BACK MORE TO WHERE IT WAS BEFORE COVID. >> MY COLLEAGUES ARE ANXIOUS TO ASK QUESTIONS HERE, BUT I WANT TO DO ONE MORE BEFORE I GO WHERE I GIVE IT UP HERE, IS IT YOUR OPINION THAT THIS, THE CONSUMER, AND GROWTH NEEDS TO SLOW TO GET BACK TO YOUR 2% INFLATION TARGET OR CAN WE DO IT WITH GDP REMAINING ABOVE TREND AND POTENTIAL? >> WELL, WE HAD A REALLY GOOD YEAR LAST YEAR. SUPPLY CHAIN STUFF WAS UNBELIEVABLY HELPFUL. >> AND YOU DIDN'T NEED TO RUN BELOW POTENTIAL? >> EXACTLY. AND YOU COULD ALWAYS COME UP WITH SOME MORE SUPPLY STORIES, SUPPLY SIDE STORIES, THAT WOULD HELP YOU. I THINK WE'RE GOING TO HAVE TO TAKE THE EDGE OFF DEMAND, NOT WE, BUT THE EDGE OFF DEMAND A LITTLE BIT MORE TO HAVE INFLATION BACK AT TARGET. WE'LL SEE.
