Fed’s Barkin: Shutdown Could Cause Short disruptions, bigger questions Still on jobs and inflation

Richmond Fed President Thomas Barkin said the ongoing US government shutdown is likely to cause only brief delays in economic data, not lasting damage to the broader economic outlook. Speaking on Tuesday, Barkin stressed that while the flow of official numbers may slow for a few days, the Federal Reserve’s core challenges remain unchanged: employment momentum and inflation progress.


Barkin described the idea of an economy with no job growth as “uncomfortable,” even if the unemployment rate stays low. For the Fed, stable unemployment alone is not enough if hiring stalls and labor demand weakens beneath the surface.
Demand looks solid, inflation still the test


He noted that recent US data has been encouraging on the demand side, with consumption holding up and both employment and inflation showing resilience. Companies, he said, consistently report that demand is “fine,” but not overheated.


That distinction matters for policymakers trying to judge whether the economy is running too hot or simply steady.
At the same time, Barkin made clear that inflation remains the unresolved issue. While he is open to the idea that inflation will continue to cool, he wants clearer evidence before declaring victory. The timing of a return to the Fed’s 2% target, he said, is still an open question.


Policy now in restrictive territory

Barkin acknowledged that interest rates are now at the higher end of estimates for a neutral policy stance, meaning monetary policy is already applying restraint. Businesses also appear to be losing some pricing power, another sign that inflation pressures may be easing, albeit gradually.


He added that productivity gains are not coming only from artificial intelligence, but also from companies adapting to earlier labor shortages by limiting hiring and reorganizing operations.


Fed independence and focus

On institutional issues, Barkin emphasized that the Fed’s job is to carry out the mandate set by Congress, regardless of political noise. He expressed confidence that the next Fed chair would do the same. He also cautioned against focusing too narrowly on the size of the Fed’s balance sheet, noting that it reflects many components beyond bank reserves.

Overall, Barkin’s message was steady rather than dramatic: short-term disruptions from the shutdown may blur the data, but the Fed’s real task—balancing employment risks against stubborn inflation—remains firmly in focus.