Richmond Federal Reserve President Tom Barkin indicated that last year's interest rate cuts helped bolster the labor market, and officials are now focused on pulling inflation back to the central bank's target level. “I think those cuts bought some insurance to support the labor market as we work to finish the last mile on inflation,” Barkin said in prepared remarks for an event in Columbia, South Carolina, on Tuesday. Barkin stated that as uncertainty diminishes, the economic outlook is improving, but risks persist because hiring is concentrated in just a few sectors and inflation remains above the Fed's 2% target. Fed officials last week held the benchmark interest rate steady within the target range of 3.5% to 3.75%. Fed Chair Jerome Powell noted that after three consecutive rate cuts last year, current policy is in a good position to address risks to employment and inflation. Barkin mentioned that uncertainties caused by last year's tariffs and other policy changes began to fade in 2026. He said businesses he has spoken with report that demand remains stable. Barkin also anticipates that tax refunds, lower gasoline prices, and more accommodative monetary policy will support the economy this year. The Richmond Fed president reiterated that financially pressured consumers are resisting companies' attempts to pass on tariff costs through price increases, which helps restrain inflation. He also warned that although overall U.S. economic demand has proven resilient, this is largely due to artificial intelligence infrastructure investment and spending by affluent consumers, which he views as interconnected. “These two parts are linked to each other,” he said. “A cooling-off in the AI space could impact business investment and the stock market, subsequently affecting consumption among the wealthy as their net worth declines.”