The Federal Reserve Bank of Richmond, one of 12 regional banks in the Federal Reserve System, recently shared an economic outlook for 2026 during a speech at the Raleigh Chamber of Commerce. The bank operates across the Fifth Federal Reserve District, which includes Maryland, Virginia, North Carolina, South Carolina, the District of Columbia, and most of West Virginia. Its responsibilities include overseeing financial institutions for safety and regulatory compliance, supporting national payment processes, providing regional economic insights for monetary policy, and promoting community development through economic education efforts. More information about its operations can be found on its official website.
Tom Barkin, president and chief executive officer of the Richmond Fed, reflected on recent economic developments by referencing popular songs to illustrate key points. “I’m Still Standing feels like the right note to start,” Barkin said. He noted that since 2020, the U.S. economy has faced significant challenges such as a global pandemic, inflation surges, rising interest rates, bank failures, declines in office real estate values, geopolitical conflicts, and shifts in government policies.
Despite these issues and repeated predictions of recession—supported by indicators like the Conference Board’s Index of Leading Economic Indicators—the economy has shown resilience. According to Barkin: “And yet, the U.S. economy has proven remarkably resilient. R.E.M. got it wrong. It certainly hasn’t been ‘The End of the World as We Know It.’ Third quarter GDP came in at a healthy 4.3 percent. October core retail sales showed that consumers are still spending. And while the unemployment rate has been ticking up… it still remains historically low at 4.6 percent.” He added that core PCE inflation is now at 2.8 percent.
Barkin attributed this resilience to strong fundamentals: steady employment growth, increasing real wages, rising asset values, and solid corporate earnings outlooks.
Looking back at 2025, Barkin described it as a year marked by uncertainty due to policy changes such as tariffs and reductions in government spending but also offset by investment incentives from tax reforms and deregulation. He stated: “Most businesses spent the year on the side of the road with their hazards on; Not hiring but not firing; Not cutting back on investments but not leaning into more growth.”
He explained how both consumers and businesses adapted: “You would have thought that this challenge in passing on costs would have reduced operating margins, but businesses leveraged automation… to drive productivity that served as an offset.” He also pointed out that lower immigration and retirements limited labor supply growth.
Discussing prospects for 2026, Barkin outlined both pessimistic and optimistic views regarding ongoing economic performance. On concerns about narrow demand drivers—primarily AI investment and wealthy consumers—he remarked: “What would happen if the AI frenzy were to ease? It has been supporting virtually all of the growth in business investment.” Job growth was described as concentrated in health care and social assistance sectors.
On consumer sentiment he noted: “Consumer sentiment has dipped notably… That’s worse sentiment than during the Global Financial Crisis… I attribute the negativity to continued frustration with the level of prices.”
For those optimistic about recovery ahead he referenced Journey’s “Don’t Stop Believin’,” stating: “2025’s uncertainty is bound to diminish; the fog should lift.” Barkin highlighted expected fiscal stimulus from recent tax legislation along with deregulatory measures and previous rate cuts totaling 175 basis points as factors likely to support future economic activity.
Addressing monetary policy going forward he said: “Both sides of our mandate bear watching… With inflation above target now for almost five years, no one wants higher inflation expectations to get embedded.” He emphasized that future policy decisions will require careful judgment given recent data limitations.
Barkin concluded his remarks with humor regarding his musical references: “As you can tell from all these song references, I went to college in the ’80s. So my Spotify age… is 64.”
The Federal Reserve Bank of Richmond continues its role within central banking operations by helping maintain a stable financial system through oversight functions and support for payment systems. It provides research-based insights for national monetary policy and engages communities through educational initiatives.
