Richmond Federal Reserve President Tom Barkin has said the direction of US monetary policy is now straightforward, even if the speed of the next move is not. With inflation still high, demand solid and unemployment relatively low, Barkin told SiriusXM's Business Briefing on Friday, October 30, that the question facing the Federal Reserve is no longer whether rates need to rise, but how quickly to move.
His remarks land two days after the Fed held its benchmark rate steady at 3.75% to 4.00% on Wednesday, October 28, in a 10-2 vote, and they sharpen the market's focus on the central bank's final meeting of the year, on December 8-9. Investors now widely expect that meeting to deliver another quarter-point increase, the second hike since the Fed resumed tightening in September after its first increase since 2023.
Barkin was asked directly on SiriusXM's Business Briefing whether the Fed would need to raise rates again. His answer left little doubt about the direction of travel. "Inflation's high, demand is solid, unemployment is relatively low. So I think the direction of travel is pretty straightforward," he said. "The question, though, is pace ... We signalled a gradual approach. Gradual makes sense when you're not much behind the curve, where you want time to learn."
That framing matters because it separates two debates that are often merged. The first is whether the economy still needs tighter policy. On Barkin's telling, the data answer that question: inflation has stayed above the Fed's 2% target for years, growth has beaten forecasts, and the labour market has held up. The second debate is tactical — whether to move at every meeting, pause between moves, or wait for more evidence — and that, he said, is where judgement and timing come in.
Barkin also pointed to what he is hearing on the ground. Businesses across the Richmond Fed's district, which covers the mid-Atlantic and Southeast, report both rising cost pressures and a willingness to pass those costs along, he said. Booming investment in artificial intelligence is boosting demand and pushing up an array of prices, from computer chips to construction inputs, adding a new source of pressure on top of older ones.
"There are a lot of cost pressures that are hitting American businesses," Barkin said, citing diesel fuel, computer chips and wages for skilled labour. "In the context of four or five years of elevated inflation I think it is just easier to make the argument... We are going to have to" raise prices. He added a warning about expectations: "That lived experience of inflation does affect future inflation, unless of course the Fed does something about it."
The October meeting set the stage for Barkin's comments. On October 28, the Federal Open Market Committee voted 10-2 to keep the federal funds target range at 3.75% to 4.00%. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring an immediate quarter-point increase. It was the first meeting since the Fed raised rates in September for the first time since 2023, a move that ended a long pause and signalled that the easing cycle was over.
Fed Chair Kevin Warsh declined at his Wednesday press conference to give forward guidance, but the committee's statement did much of the talking. It said "the accumulation of more information" would help determine the policy stance needed for a timely return of inflation to the 2% goal. Many analysts read that new language as a signal that hikes remain on the table, absent an unexpected drop in inflation that has proved more persistent than many policymakers expected.
The data released this week reinforced that reading. The economy grew at a 3.4% annualised rate in the third quarter of 2026, the Bureau of Economic Analysis reported on October 29, up from 2.2% in the second quarter and above forecasts of about 3.1%. Consumer spending rose 3.8% and equipment investment jumped 20.9%, while final sales to private domestic purchasers grew 4.9%.
Inflation data pointed the same way. September's personal consumption expenditures price index rose 0.5% on the month, the largest monthly gain since March, and 3.6% on the year, up from 3.4%. Core PCE, which strips out food and energy, rose 0.3% on the month and 3.1% on the year. Both measures remain well above the Fed's 2% target, and the September figures arrived a day after the Fed's hold, hardening expectations of a December move.
Barkin's own recent history fits the pattern. In a speech titled "Why Hike?" to the CFA Society Baltimore on September 22, he noted that inflation had remained above target for more than five years. At Howard University on October 13, he described inflation as "enduring", said acting "makes sense", and insisted the 2% target was achievable, adding: "We can hit it." He has also repeatedly tied AI investment to price pressures, describing an "enormous AI investment cycle" and noting that heavy spending on data centres and chips is lifting demand for scarce inputs.
The next step could come as soon as the December 8-9 meeting, when investors expect policymakers to approve another quarter-point rate hike, Reuters reported on Friday. After the October hold, traders priced in about 85% odds of a quarter-point hike at that meeting, according to CME FedWatch, up from roughly 78% the day before, as the two dissents signalled that a hike remains live.
More recent market-based estimates have been somewhat lower, reflecting the sharp fall in equity markets this week. An average of Kalshi and Polymarket prices observed on the morning of October 30 put a quarter-point December hike at about 71% to 74%, with a hold at about 26% and a cut at about 2%. The direction of the bet is the same — a hike is the favoured outcome — but the odds have softened as the sell-off in technology shares raises questions about future consumer spending and cost pressures.
That tension is central to Barkin's "pace" argument. A rapid series of hikes could cool demand quickly but risks over-tightening into a market downturn; a gradual path gives the Fed time to see whether falling share prices, tighter financial conditions and weaker sentiment do some of its work for it. Barkin's point that the Fed is "not much behind the curve" is, in effect, an argument that it can afford to move step by step rather than catching up in a hurry.
One institutional detail also matters for how Barkin's words should be read. He is not a voter on interest-rate policy this year, but he will become a voter next year, when the Fed is expected to continue raising borrowing costs. His comments therefore carry weight as a signal of where the committee's centre of gravity may sit in 2027, even though he did not cast a vote at the October meeting.
Barkin's core message was deliberately plain. "Inflation's high, demand is solid, unemployment is relatively low. So I think the direction of travel is pretty straightforward," he said. On pace, he added: "We signalled a gradual approach. Gradual makes sense when you're not much behind the curve, where you want time to learn."
On business pricing, his language was equally direct. "There are a lot of cost pressures that are hitting American businesses," he said, listing diesel fuel, computer chips and wages for skilled labour, before concluding: "We are going to have to" raise prices. And on why that matters for policy, he warned: "That lived experience of inflation does affect future inflation, unless of course the Fed does something about it."
Market strategists drew a similar conclusion from the October statement itself. "Although the Fed held off on raising rates today, as we expected, they left plenty of clues that they were planning to raise rates in December," Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note after the October decision. He added that if it were not so close to the midterm elections, the Fed probably would have raised rates in October, and that it was now unlikely anything would stop a December hike.
Not every voice is so certain. Some analysts note that the Fed's September projections, in which 16 of 18 participants pencilled in at least one more rise this year, were made before the latest market sell-off, and that a further deterioration in financial conditions could give the committee pause. The Fed itself has stressed that its December decision will depend on the accumulation of more information, including the next employment and inflation reports due before the meeting.
A December hike would matter far beyond Wall Street because the federal funds rate sets the floor for borrowing costs across the economy. Mortgages, car loans, credit-card rates and business lending all move, with a lag, in the same direction. A second hike in four months, taking the range to 4.00% to 4.25%, would add to the cost of servicing debt for households already facing prices rising at 3.6% a year, while also raising the return on savings.
It would also matter politically. The December meeting falls a month after the November 3 midterm elections, and the Fed has been sensitive to appearing politicised in the run-up to the vote. Some analysts argued that this sensitivity helped explain the October hold. A December move, after the votes are counted, would be read as the Fed acting on the data rather than the calendar — but it would still land in an economy where affordability has become the central campaign issue.
For the Fed's credibility, the stakes are high in a different way. Inflation has now spent more than five years above the 2% target, and Barkin's own surveys show businesses expecting price growth of about 4.1% in 2027, more than double the pre-pandemic average. If firms conclude that higher prices will simply be accepted, inflation expectations can become self-fulfilling. Barkin's warning about "lived experience" is a reminder that the Fed is fighting not just current price rises but the habits formed during years of them.
The AI boom complicates the picture further. Investment in data centres, chips and power infrastructure is supporting growth and jobs, but it is also bidding up the prices of exactly the inputs the Fed watches. If AI spending continues at its current pace, the Fed may find that demand stays strong even as rates rise — which would argue for more, not fewer, hikes. If it cools, as Barkin himself has warned it eventually must, the case for gradualism grows stronger.
The calendar to December is now the story. The Fed meets on December 8-9, with updated economic projections and a press conference alongside the decision. Before then, markets will parse every major data release — the October employment report, the next PCE inflation reading, and the second estimate of third-quarter GDP due on November 25 — for signs that inflation is cooling or broadening.
Watch also for further speeches from Fed officials in the coming weeks. Barkin's interview is the first major signal since the October hold, but the committee's voters, including Cook and Hammack, who dissented for a hike, and Chair Warsh, who has so far declined to guide markets, will shape expectations as the meeting approaches. Any shift in their language toward urgency — or toward caution after the market sell-off — will move pricing quickly.
For households and businesses, the practical question is timing. A December hike would likely feed through to variable-rate borrowing in early 2027, just as holiday spending bills arrive and as firms set budgets for the new year. Fixed-rate mortgage borrowers would feel it more slowly, through higher rates on new loans, but the direction would be unmistakable: after years of cuts and pauses, the cost of money in America is rising again, and Barkin says the Fed intends to keep moving, one gradual step at a time.
On SiriusXM's Business Briefing on Friday, October 30, Barkin said: "Inflation's high, demand is solid, unemployment is relatively low. So I think the direction of travel is pretty straightforward." He added that the question is pace, and that a gradual approach makes sense when the Fed is "not much behind the curve".
The Federal Open Market Committee meets on December 8-9, 2026, with the decision announced on December 9 alongside updated economic projections. It is the Fed's final scheduled meeting of 2026.
The federal funds target range is 3.75% to 4.00%, set in September 2026 and held at the October 28 meeting in a 10-2 vote. A quarter-point hike in December would take it to 4.00% to 4.25%.
Growth came in at 3.4% annualised in the third quarter, September PCE inflation rose to 3.6% on the year, and the October statement said "the accumulation of more information" would guide policy — language analysts read as preparing markets for a hike. CME FedWatch put December hike odds at about 85% after the October hold.
Not in 2026. Barkin is not a voter on the Federal Open Market Committee this year, but he becomes a voter in 2027, when the Fed is expected to continue raising borrowing costs.
Read more on US News Pulse: US GDP growth jumps to 3.4% as September inflation hits 3.6% before Fed decision, Tech stocks slump worldwide as Alphabet's $500 billion rout spreads to Asia, and US stock market selloff: Nasdaq slides as Alphabet AI spending spooks investors.
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