Barkin says demand holds up and firms plan to pass rising costs on to customers

The Richmond Fed president sees weakness only in housing and among non-profits, which gives neither the hawks nor the patient camp new material.

Richmond Fed president Tom Barkin says business owners report solid demand, with softness confined to non-profits and housing, and that cost pressures are broad enough that firms are drawing up plans to pass them on to customers.

That is a description of the economy, not a signal on policy. Earlier today Barkin cast the argument over inflation as one of pace, not direction, and gave no hint of his next move. On Oct 14 he said inflation was running higher than he had hoped but that he would not prejudge the October meeting, which put him alongside Bowman in the wait-and-see camp. The new remarks fit that position. They also echo his point that businesses find price rises easier after years of elevated inflation.

The Fed held its rate at 3.75-4.00 per cent on a 10-2 vote, with Cook and Hammack dissenting in favour of an increase. Hammack said on Oct 12 that the question was how fast to raise rates, not whether.

The data keep the argument open. September PCE inflation eased to 3.1 per cent against 3.6 per cent expected, yet the monthly readings in the same release picked up pace. Barkin's account of firms passing on costs supports the worry in the monthly figures, but his finding that demand is solid except in housing and non-profits offers no case for moving faster either.

Some forecasters have already decided. BofA expects 25 basis point rises in December and in March 2027, and JPMorgan's Yuxuan Tang sees a December hike and another in the first quarter, taking the 10-year Treasury yield to 5.25-5.5% by midyear. Barkin's remarks do not move that call either way, so long-dated yields stay tied to the next inflation data and not to this comment.