Richmond Fed's Barkin says the question in fighting inflation is the pace, not the direction

The Richmond Fed president says cost pressures are hitting a lot of US businesses, but offers no sign of where he would move next.

Richmond Fed President Barkin says the question in fighting inflation is the pace, not the direction, and that "we'll see what we learn over the next period." He adds that a lot of cost pressures are hitting US businesses. It is a careful sentence, and it keeps him with Bowman in the wait-and-see camp, apart from the hawks who pushed for tightening through October: Hammack, Goolsbee and Collins.

Hammack has been blunter. He said this month that the question is how fast to raise rates, not whether, and that inflation pressures are broadening beyond AI spending. Barkin backed the September hike, saying inflation risk outweighed the risk to jobs, and said he wanted this cycle to resemble the mid-cycle adjustment of the 1990s rather than a prolonged campaign. Pace, in his usage, still points to a short cycle.

The data give neither side a clean win. The Fed held its key rate at 3.75-4.00 per cent on Oct 28 by a 10-2 vote, with Cook and Hammack voting for an increase. Chair Warsh deferred to incoming data rather than committing to a path. Then September PCE inflation eased to 3.1 per cent, below the 3.6 per cent expected, while the monthly reading accelerated to 0.5 per cent. A cooler annual rate and a hotter monthly one leave the hawkish case neither confirmed nor dismissed, and Barkin's comment resolves nothing.

Banks are betting the hawks win. BofA expects 25 basis point rises in December and again in March 2027, and JPMorgan's Yuxuan Tang sees hikes in December and the first quarter, taking the 10-year Treasury yield to 5.25-5.5% by midyear. Traders have been less steady: they priced near 90% odds of a December rise on Oct 15, then moved away from a hike before year-end a week later. Long-dated Treasury yields are waiting on the next data point, not on Fed speeches, and Barkin's remarks give them no reason to move before it arrives.