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Barkin says rate hikes may not be needed if inflation shocks fade

The Richmond Fed president pointed to tariffs, higher oil prices and AI-related demand as temporary drivers, adding that embedded inflation risks persist if supply chains and AI cost pressures continue.

Reported · Written up by our desk · Central Banks

Richmond Fed President Thomas Barkin said Thursday it remains unclear whether the Federal Reserve will need to raise rates again to return inflation to 2%, arguing that some recent price pressures may pass without additional tightening.

In prepared remarks to the Greenville Chamber of Commerce, Barkin framed the key question as how inflation moves to target, and whether existing policy is restrictive enough if those shocks ease. He said much of today’s elevated inflation level has come from shocks tied to tariffs, higher oil prices, and AI-related demand for labor and supplies.

Barkin added that if those shocks dissipate, many believe the current level of interest rates is still restrictive enough to bring inflation down. However, he warned inflation could become more embedded if supply chain problems persist or if AI investment continues to push up costs.

The remarks also highlighted the risk of an upward shift in price expectations for firms and consumers, given that inflation has stayed above target since 2021. Barkin’s comments positioned the Fed in a wait-and-see stance, while suggesting incoming inflation data and evidence on whether cost shocks are fading will be decisive.

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