Richmond Federal Reserve President Thomas Barkin said the central bank will need to raise interest rates further, but at a gradual pace. Speaking at the Richmond Fed's 2026 CFO Summit on CNBC, Barkin noted that unemployment sits near record lows while inflation remains elevated. "The path is pretty straightforward. The question, of course, is pace," he said.
Barkin favors a gradual approach given uncertainty in the world and more information expected ahead. He considers current policy close to neutral, meaning it neither restricts nor promotes growth. "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."
The Fed's policy rate currently sits between 3.75% and 4%, unchanged after the committee's recent meeting. The FOMC said it is awaiting "accumulation of more information" before deciding next steps. Markets are pricing in better than an 80% chance of a rate hike in December, then one more move in 2027, according to CME Group's FedWatch tool.
Barkin called inflation "the most important risk right now" and expressed hope that the Fed's September increase and future moves will help bring it down. He noted that artificial intelligence represents one source of price pressures, though he expects it eventually will boost production and ease inflation over time. He also said debt issuance to hyperscalers, estimated at over $500 billion this year, is "worth watching" for potential credit issues, particularly regarding which intermediaries may be taking on unknown risks.