COLUMBIA, South Carolina, Feb 3 (Reuters) - The U.S. Federal Reserve's interest rate cuts so far have helped insure the health of the job market while the Fed tries to complete "the last mile" in returning inflation to the central bank's 2% target, Richmond Fed President Tom Barkin said on Tuesday.
The 1.75 percentage points of cuts approved since the fall of 2024 have "taken out some insurance to support the labor market as we work to complete the last mile to bring inflation back to target," Barkin
said, noting that the unemployment rate remains low by historical standards while inflation remains around a percentage point above target but is expected to decline in coming months.
"So far so good," Barkin said, adding that the Fed needed 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," Barkin said in comments prepared for delivery to a South Carolina education group. "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 consistent with an ongoing pause in rate cuts as the Fed awaits data confirming an expected decline in inflation this year and is in the midst of a transition to a new chair with the nomination of former Governor Kevin Warsh last week to take over for current Chair Jerome Powell.
Barkin said he expected the economy to remain resilient in 2026, with "significant stimulus" coming in the form of deregulation and tax reductions, and firms saying they are confident about ongoing demand.
"It’s hard to imagine consumers and businesses moving to the sidelines," Barkin said. Firms "tell me demand is fine," he said. "Most firms I speak to still aren’t doing layoffs at scale."
The recent jump in productivity, he said, should also help with inflation because "businesses can bear higher input costs without facing as much pressure to increase prices."
(Reporting by Howard Schneider; Editing by Chizu Nomiyama )
