Barkin Says Fed Should Tread Carefully on Rates as Inflation Tops Risk List

Richmond Federal Reserve President Tom Barkin said the central bank should shift monetary policy carefully as it works out its inflation response, calling price pressures the biggest risk it faces. In remarks prepared for the Greater Greer Chamber of Commerce in South Carolina, he noted inflation has now run above the Fed's 2% target for nearly six years. That puts the danger on the inflation half of the Fed's dual mandate, he said.

Barkin didn't hide where he thinks policy is headed. With demand healthy and inflation stubbornly elevated, he said the appropriate direction is relatively straightforward — even as he argued it is wise to move with care. Traders are already betting on a rate increase at the Fed's Dec. 8-9 meeting, according to the report. Barkin becomes a voting member of the policy-setting committee in 2027.

The reason for caution, he said, is the labor market. Barkin called the buildout of artificial intelligence technology particularly consequential, pointing to the sharp swings in tech stocks and in the odds markets assign to Fed hikes in the days after last week's US midterm elections.

He sketched out both directions of the AI bet. If the technology underdelivers, it could pull down business investment, stock prices and consumer spending — kneecapping a key growth engine and possibly pushing unemployment higher. If it overdelivers, Barkin warned, it could displace more workers than expected. Businesses, meanwhile, keep telling him costs are rising and that they plan to pass them along to customers.