U.S. Fed President Doubts Sustained Productivity Surge Despite Recent Gains

Rising productivity is helping businesses ease cost pressures, aiding the U.S. central bank’s inflation fight, but it is difficult to predict if it will persist and, as a result, hard to know how monetary policy might need to respond, Richmond Fed President Tom Barkin said on Tuesday in comments highlighting an issue likely to be at the center of coming policy debates.

“I do think productivity is up,” Barkin said in comments to reporters after an event in Columbia, South Carolina. “The hard part with productivity, of course, is it’s not perfectly measured. It’s a volatile series.” 

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Barkin added that while he was open to the idea that output per worker may keep growing somewhat faster than before, he is skeptical of the outlook for more robust productivity growth.

Productivity jumped nearly 5% in the third quarter of 2025, but Barkin said change over a four-quarter period is a better gauge of the possible trend. He said he was “reasonably confident” that figure was around 2%, an improvement over recent years but likely short of the pace that would touch off a low-inflation economic boom.

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“We may get more information over time that reinforces … that what we saw in the third quarter is actually continuing,” Barkin said. “That would be awesome. But I think you want to kind of see.”

Rising productivity allows businesses to produce more with fewer resources, easing the need to raise prices. An outlook for continued productivity improvement, particularly with the diffusion of artificial intelligence technology, is one of the main arguments Fed chief nominee Kevin Warsh and current Fed Governor Stephen Miran use in advocating further interest rate cuts even with inflation still about a percentage point above the central bank’s 2% target.

Barkin said he was open to the idea that productivity, alongside ongoing deregulation and tax cuts, could boost the economy even as inflation improves.

But he also said he did not agree the current moment is analogous to the one former Fed Chair Alan Greenspan faced in the 1990s, when he resisted calls for rate hikes to stem what appeared to be developing inflation because he felt computer technology would allow growth to accelerate and lower inflation risks at the same time.

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It was “a different question than the one we’re living with now,” with current inflation about a percentage point above target, not improving for the past year and the public contending with what is now a five-year inflation miss by the central bank, Barkin said. 

“In their case, demand was quite strong … but inflation wasn’t. In our case, demand is not as strong, and inflation is higher. It is just a different conversation,” he said.

Fed Has Paused Rate Cuts

The potential impact of extended high inflation on public psychology is one reason the Fed paused its rate cuts last week and may stay on hold for months to come as policymakers wait for more information on the direction of the labor market, prices, and economic growth.

“Inflation … still remains above our target. That’s been the case since 2021,” Barkin said in separate comments to a South Carolina education group. “I take this sustained miss seriously. … Today’s inflation numbers, regardless of the ‘why,’ significantly influence tomorrow’s inflation.”

Barkin is not a voting member of the Fed’s policy-setting committee this year, but his comments are consistent with an ongoing rate-cut pause as the central bank awaits data confirming an expected decline in inflation this year and prepares for a leadership transition.

The Richmond Fed president said he expected the economy to remain resilient in 2026, with “significant stimulus” coming in the form of deregulation and tax reductions, and firms saying they are confident about ongoing demand.

“It’s hard to imagine consumers and businesses moving to the sidelines,” Barkin said. Firms “tell me demand is fine.”

(Reporting by Howard Schneider; Editing by Chizu Nomiyama and Paul Simao)

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