Richmond Federal Reserve President Tom Barkin said on Tuesday that interest rate reductions approved since the fall of 2024 have helped shore up the U.S. job market while the central bank seeks to complete what he called the “last mile” toward its 2% inflation objective.
Barkin said the cumulative 1.75 percentage points of cuts have "taken out some insurance to support the labor market as we work to complete the last mile to bring inflation back to target." He noted that the unemployment rate remains low by historical standards even as inflation sits roughly one percentage point above the Fed's goal, with signs pointing to a decline in coming months.
"So far so good," Barkin said in prepared remarks to a South Carolina education group, adding that the central bank still needs to finish the task of returning inflation to 2% after a nearly five-year miss. "Inflation...still remains above our target. That’s been the case since 2021," he added. "I take this sustained miss seriously...Today’s inflation numbers, regardless of the 'why,' significantly influence tomorrow’s inflation."
Barkin is not a voter on monetary policy this year, but his comments are aligned with the ongoing pause in additional rate cuts as the Fed awaits confirming data on the expected slowdown in inflation. His remarks come amid a leadership transition at the central bank following the nomination last week of former Governor Kevin Warsh to succeed Chair Jerome Powell.
Looking beyond near-term policy, Barkin said he expected the economy to remain resilient in 2026. He pointed to "significant stimulus" taking the form of deregulation and tax reductions, and he cited conversations with firms that report confidence in ongoing demand. "It’s hard to imagine consumers and businesses moving to the sidelines," he said. "Firms tell me demand is fine. Most firms I speak to still aren’t doing layoffs at scale."
Barkin also noted a recent jump in productivity, saying higher productivity should ease inflationary pressures because "businesses can bear higher input costs without facing as much pressure to increase prices."
The combination of policy easing earlier in the cycle, continued solid labor market metrics, elevated but moderating inflation, a leadership transition at the Fed, and improving productivity framed Barkin's assessment of where the economy stands and what the central bank is watching as it seeks to complete the final steps toward its inflation target.