Richmond Fed President Tom Barkin said the economic environment is becoming clearer as the US moves into 2026, after what he described as an overwhelming pace of change last year. Speaking today, Barkin likened 2025 to “driving in a dense fog,” citing geopolitical tensions, rapid advances in artificial intelligence, and sweeping government policy shifts spanning tariffs, immigration, taxes, deregulation, and fiscal spending.
Barkin argued that the fog now appears to be lifting, revealing an economy that remains “remarkably resilient.” He pointed to meaningful additional support from government policy, including tax refunds, reduced withholding, lower gasoline prices, and the cumulative impact of the Fed’s rate cuts over the past year and a half. Deregulatory efforts should also bolster growth, while slower net migration reduces the pace of job growth needed to keep unemployment stable. At the same time, renewed bipartisan focus on affordability could add disinflationary pressure in coming months.
Despite the more constructive outlook, Barkin stressed that inflation remains above target and has done so since 2021. He said it would be easy to attribute the overshoot to one-off factors such as tariffs or shelter-cost measurement lags, but warned against complacency. “I take this sustained miss seriously,” he said, arguing that today’s inflation outcomes, regardless of their cause, “significantly influence tomorrow’s inflation.”
