03:21 PM EDT, 09/26/2025 (MT Newswires) -- Richmond Fed President Tom Barkin said Friday that downside risks to employment will likely be limited, while factors including productivity growth would help contain upward pressure on inflation.

In prepared remarks for delivery at the Peterson Institute for International Economics in Washington, D.C., Barkin enumerated reasons to be "more sanguine" looking ahead.

Barkin noted that despite a marked slowdown in job growth, the unemployment rate has remained relatively stable as labor supply and demand are contracting at a similar pace.

He also pointed out that strong consumer demand and healthy underlying dynamics for businesses.

"After years of low hiring, (businesses) should have fewer extra workers and therefore be less likely to need to resort to sizable layoffs," Barkin said. "Net that means the downside in the labor market should be limited."

While inflation remains above the Federal Reserve's 2% target as tariffs have pushed prices higher, Barkin said "price-setters seem reluctant to make price increases too visible." He highlighted higher productivity growth, which "helps offset margin pressure in a way that limits inflation," Barkin said.

Meanwhile, a seemingly cautious spending approach by consumers should "limit the magnitude" of pricing gains, he said.

Earlier this week, Fed Chair Jerome Powell said the central bank faces a "challenging situation," with near-term risks to inflation tilted to the upside and those to employment leaning downside. Last week, the Fed's monetary policy committee lowered its benchmark lending rate by 25 basis points, noting increased downside risks to employment and signaling further monetary policy easing later in 2025.

Separately, Fed Vice Chair for Supervision Michelle Bowman on Friday reiterated that policymakers are at a "serious risk of already being behind the curve" in addressing a weakening labor market.

She advocated a forward-looking focus for the Federal Open Market Committee, rather than strictly following the usual data-dependent approach.

"The rising downside risks to employment and the potential for greater damage to the labor market underscore the need to shift our focus away from overemphasizing the latest data points," Bowman said.