Remarks from Federal Reserve (Fed) Bank of Richmond President Thomas Barkin underline the economy’s resilience even as inflation remains above target. Barkin notes that, to date, rate cuts are framed as insurance for the labour market while the Fed works through the final phase of disinflation.

Key Quotes

Rate cuts so far have helped ensure the health of the job market while the Fed completes the last mile of returning inflation to target.

The economy remains remarkably resilient.

Given solid growth and low unemployment, it is hard to imagine businesses or consumers moving to the sidelines.

Rising productivity suggests firms can absorb higher input costs without needing to raise prices.

Firms report demand is fine and are not undertaking layoffs at scale.

Significant stimulus is arriving via deregulation as well as tax and withholding changes.

Inflation remains above target, but further progress is expected.

Both job growth and spending have been narrowly focused across the economy.

The sustained inflation overshoot since 2021 should be taken seriously, as it can shape future inflation dynamics.

Slow growth in the labour supply, driven by declining immigration and low fertility rates, is a key long-term concern.