Barkin sees interest rate hikes ahead, but at a gradual pace
Richmond Federal Reserve President Thomas Barkin said Thursday that he expects the central bank will have to raise interest rates further, though he's not sure by how much or at what pace. In a CNBC interview that was part of the Richmond Fed's 2026 CFO Summit, the policymaker expressed concern over inflation and said monetary policy will need to adjust.
"Unemployment's near record lows, and inflation is too high. That means the path is pretty straightforward. The question, of course, is pace," Barkin said in the talk with CNBC's Steve Liesman.
"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," he added.
Barkin's comments come a little more than a week after his colleagues voted to keep the Fed's benchmark overnight borrowing rate anchored in a range between 3.75% and 4%. While Barkin is not a voting member on the rate-setting Federal Open Market Committee now, he will be in 2027.
In its post-meeting statement, the FOMC said it is awaiting the "accumulation of more information" as it deliberates where to go next. When the committee OK'd a quarter percentage point hike in September, officials largely agreed that another increase was likely before the end of 2026.
Markets are pricing in a better than 80% chance of a hike in December, then one more move in 2027, according to the CME Group's FedWatch tool.
Barkin said he considers current policy close to a point where it neither restricts nor promotes growth, which officials consider a neutral rate.
"If you're restricting the economy, presumably you're restricting consumption, which is you know roughly two-thirds of the economy, and that's relatively elevated," he said. "So that would make the case that we're a little bit accommodative."
Inflation, he added, "is the most important risk right now ... and I hope that our move in September and whatever else we might choose to do in the future will have some impact on inflation."
Artificial intelligence is one source of price pressures, though he said it eventually will spur production and help ease inflation further down the road.
In a related matter, he said the debt issuance to hyperscalers, estimated this year at better than $500 billion, is "worth watching" for potential credit issues.
"It's pretty hard to convince yourself that some of these big hyperscalers who are generating so much cash from their core businesses aren't good credits," he said. "So it's more who are the intermediaries in this world who are taking on risks that you don't know about. ... You do wonder where in the intermediary sector is the biggest risk."
