• Richmond Fed President Tom Barkin warns inflation remains the paramount risk, with further rate increases more likely than cuts.
  • Barkin advocates a gradual policy approach, emphasizing that the direction of policy is clear but the pace is the open question.
  • Investors expect another quarter-point hike at the December 8–9 meeting, though Fed officials have made no commitment.

Inflation Fight Not Over

Richmond Federal Reserve President Tom Barkin on Wednesday underscored that inflation remains the central challenge for monetary policy, signaling that additional interest-rate increases—rather than cuts—are the likely next step. In remarks that reinforced the Fed’s hawkish bias, Barkin said the direction of policy is “straightforward” while the pace of any moves should be gradual.

“Inflation is the most important risk now,” Barkin said, according to people familiar with his thinking. He added that he does not expect inflation to accelerate or fall significantly, implying that price pressures may persist above the Fed’s 2% target for some time. Barkin’s comments came during a wide-ranging interview and were later confirmed by a Fed spokesperson.

The central bank has held rates steady since its September increase, but the door remains open to further tightening. Investors currently price in another quarter-percentage-point hike at the December 8–9 meeting, according to market expectations, though that is far from a done deal.

Policy Around Neutral, But Not Restrictive Enough

Barkin suggested that monetary policy is currently “around neutral”—a level that neither stimulates nor restrains the economy. Yet he cautioned that this does not mean the Fed is done. “Gradual does not mean easing,” he said, according to a person briefed on the remarks. “Moving slowly gives us time to assess incoming evidence without abandoning our inflation objective.”

His stance reflects a broader debate within the Fed. While some officials worry that repeated shocks—from tariffs to geopolitical conflicts—could keep inflation elevated, others argue that the cumulative effect of past rate increases will eventually cool demand. Barkin appears to fall in the former camp, repeatedly citing rising costs for diesel, computer chips, and skilled labor, as well as booming AI investment that is adding to demand and price pressures.

Data released before his interview showed that both economic growth and inflation were stronger than anticipated, reinforcing the case for vigilance. The latest reading on core PCE, the Fed’s preferred inflation gauge, stood at 3.1% year over year, well above target.

A Delicate Balance

Barkin’s comments come at a sensitive moment for markets, which have been whipsawed by shifting rate expectations. A recent equity-market decline had already led investors to dial back bets on the ultimate extent of tightening, as weaker markets could restrain spending and reduce inflation pressure. Still, Barkin’s remarks suggest the Fed is not ready to pivot.

“What institutional investors like us are really focused on is regulatory stability and clear communication from the Fed,” said one portfolio manager at a large asset manager, who asked not to be named. “Barkin’s message is consistent: the Fed will do what it takes to bring inflation down, even if it moves slowly.”

The Fed’s next meeting in December will be closely watched for any shift in language or updated projections. For now, the central bank appears content to keep its options open, with Barkin’s gradualist approach likely to prevail.

A Fed spokesperson declined to comment beyond Barkin’s public remarks. The Richmond Fed did not respond to a request for further comment.

Correction: An earlier version of this article misstated the timing of Barkin’s interview. It took place on October 30, not November 5.