Richmond Fed President Barkin: Further Rate Hikes Needed, but the Pace Is Key

【Financial News correspondent Lee Byung-chul in New York】 A senior Federal Reserve System (Fed) official said further rate hikes are needed to curb inflation. However, the official stressed that a gradual pace of rate increases is appropriate given economic uncertainty. The official also warned that large-scale investment in the artificial intelligence (AI) industry could increase inflationary pressures and lead to potential credit risks in financial markets.
 On the 5th (local time), CNBC reported that Tom Barkin, president of the Federal Reserve Bank of Richmond, said at the “2026 Chief Financial Officer (CFO) Summit,” hosted that day by the Richmond Fed, “The unemployment rate is close to a historic low, and inflation is far too high,” adding, “The policy direction we need to take from here is quite clear.”
He stressed, “The issue is the pace of rate hikes,” adding, “Given uncertainty in the global economy and economic data yet to be released, a gradual approach is reasonable.”
Barkin’s remarks came just over a week after the Fed held its benchmark interest rate at 3.75%–4.00% annually on the 28th of last month. The Fed raised the benchmark rate by 0.25 percentage points last September and has left the door open to another hike this year. According to the CME FedWatch Tool of the Chicago Mercantile Exchange (CME), markets are pricing in an 80% or higher probability of a rate hike in December.
Barkin assessed that the current interest rate was close to the neutral rate, which neither restrains nor stimulates economic growth. “Consumption, which accounts for about two-thirds of the U.S. economy, remains at a high level,” he said, explaining, “This supports the argument that current monetary policy is somewhat accommodative.”
He also voiced concern about the impact that increased AI investment could have on prices and financial markets. Barkin projected that AI could add to inflationary pressures in the short term but ease inflation over the long term by boosting production.
He also said the volume of bond issuance related to hyperscalers, the giant cloud companies, which is estimated to exceed $500 billion this year, “needs to be watched.”
Barkin said, “It is hard to be concerned about the creditworthiness itself of large tech companies that generate enormous amounts of cash,” but added, “The question is which financial intermediaries are taking on risks we don’t know about.” He went on to stress, “We need to look at where the greatest risks are hidden in the financial intermediation sector.”




[email protected] Correspondent Lee Byung-chul Reporter