Fed's Barkin expects more rate hikes, but says a gradual pace makes sense
Richmond Fed President Thomas Barkin says inflation is too high and unemployment near record lows, pointing to further increases without committing to a speed.
At a glance
- Richmond Fed President Thomas Barkin said he expects further rate increases but is unsure how much or how fast.
- The Fed held its benchmark rate at 3.75%-4%; markets price a better than 80% chance of a December hike.
- Barkin called inflation the most important risk and said hyperscaler debt issuance is worth watching.
Richmond Federal Reserve President Thomas Barkin said Thursday that he expects the central bank will need to raise interest rates further, though he does not know by how much or how quickly. He spoke to CNBC's Steve Liesman in an interview at the Richmond Fed's 2026 CFO Summit.
Barkin described the direction of policy as clear, with the open question being speed. "Unemployment's near record lows, and inflation is too high. That means the path is pretty straightforward. The question, of course, is pace," he said.
Asked about the tempo of any moves, he said gradualism fits an uncertain environment: "Gradual makes sense if you think there's uncertainty in the world, and if you think that there's information you're going to get in the period. And I think that's still a pace that makes sense to me."
The comments came a little more than a week after his colleagues voted to keep the Fed's benchmark overnight borrowing rate in a range of 3.75% to 4%. Barkin is not currently a voting member of the rate-setting Federal Open Market Committee, but he will be in 2027.
In its post-meeting statement, the FOMC said it is awaiting the "accumulation of more information" before deciding its next step. When the committee approved a quarter percentage point increase in September, officials largely agreed another increase was likely before the end of 2026. Markets are pricing a better than 80% chance of a hike in December, followed by one more move in 2027, according to the CME Group's FedWatch tool.
Policy close to neutral
Barkin said he considers current policy close to a level that neither restricts nor promotes growth, which officials refer to as neutral. He noted that restricting the economy would mean restraining consumption, which accounts for roughly two-thirds of activity and is relatively elevated. "So that would make the case that we're a little bit accommodative," he said.
Inflation, he added, "is the most important risk right now," and he hoped the September move and any future action would have some effect on it. Artificial intelligence is one source of price pressure, he said, though he expects it to eventually boost production and help ease inflation.
On a related matter, Barkin said debt issuance to hyperscalers, estimated at better than $500 billion this year, is "worth watching" for potential credit issues. He said the large hyperscalers generating strong cash from their core businesses are hard to view as poor credits, and that the bigger question is which intermediaries are carrying unrecognised risk.
Source: CNBC.
Questions and answers
- What did Thomas Barkin say about interest rates?
- The Richmond Fed president said he expects the central bank will have to raise rates further, but that a gradual pace makes sense given uncertainty about the economic outlook.
- Will the Fed raise rates in December?
- Markets are pricing a better than 80% chance of a December hike, per CME Group's FedWatch tool, after the FOMC said it is awaiting the accumulation of more information.
- Does Barkin vote on Fed rate decisions?
- Barkin is not currently a voting member of the Federal Open Market Committee, but he will be in 2027.
