ICYMI – Barkin says rate path unclear as sticky inflation meets resilient economy
Barkin's refusal to prejudge September, delivered before Goolsbee's more dovish framing later the same day, leaves the committee's public messaging looking genuinely split three ways rather than a simple hawks versus doves story. His emphasis on 3.7% core PCE and the risk of embedding expectations keeps a September or October hike firmly on the table even as his tone stays far more measured than Hammack's insistence on acting immediately. With Warsh reportedly pulling back on forward guidance since taking the chair, every regional president's comments are being weighted more heavily by markets than usual, and futures pricing has already trimmed September hike odds toward 50% following Wednesday's CPI and Thursday's soft PPI. Friday's retail sales print and the July FOMC minutes on August 19 now stand as the next real tests of which of these three narratives, Hammack's urgency, Barkin's agnosticism or Goolsbee's cautious optimism, gains the upper hand.
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Barkin isn't ready to call September either way, and that uncertainty is doing more to move markets than a clear signal would.
Summary:
- Barkin told a Greenville, South Carolina audience on Thursday, before Goolsbee's Fox News comments that evening, that it remains an open question whether the Fed needs to raise rates again to hit its 2% target
- He said much of today's elevated inflation stems from shocks he expects to fade, including tariffs, oil prices and AI related demand, but flagged risk that inflation stays elevated long enough to shift firm and consumer price expectations
- A separate account of the same speech, titled The Mysterious US Economy, put headline PCE inflation at 3.7% and framed the economy around four puzzles: resilience, an investment boom, low unemployment and inflation that will not finish falling
- Real private nonresidential fixed investment grew at an annualised 9.5% in the first half of 2026, more than double the pre-pandemic decade average, driven largely by AI infrastructure spending
- July payrolls fell by 23,000 even as unemployment held at 4.1%, a 58th straight month at or below 4.5%, which Barkin attributed to labour supply shrinking alongside labour demand
- Barkin declined to signal a September preference, saying he never prejudges the path forward, a notable departure given Chair Kevin Warsh has scaled back forward guidance since taking over in May, leaving markets reading every regional president for cues the committee itself is no longer providing
Richmond Fed president Tom Barkin used a Thursday appearance in Greenville, South Carolina to lay out an economy he described as resilient but stubbornly resistant to a clean read, telling the audience it remains an open question whether the Fed will need to raise rates again to bring inflation back to its 2% target. Barkin's comments came earlier in the day, before Chicago Fed president Austan Goolsbee struck a notably more upbeat tone on inflation in a Fox News interview that evening, giving markets two distinct Fed voices to parse within a matter of hours.
Barkin framed the debate as one of mechanism rather than outcome. He said the Fed's commitment to reaching 2% inflation was not in question, only how it gets there, and whether rates need to rise further or whether inflation is already headed back down on its own. He attributed much of today's elevated inflation to shocks he expects to fade over time, pointing to tariffs, higher oil prices and surging demand tied to the artificial intelligence buildout, all pressures he described as likely temporary. If those fade, he said, current interest rates may already be restrictive enough to do the job. At the same time, he flagged a more pessimistic scenario in which persistently above target inflation, running since 2021, risks becoming embedded in the price expectations of firms and consumers, a shift that could ultimately force the Fed's hand.
A more detailed account of the same appearance, delivered under the title The Mysterious US Economy, put a sharper number on the inflation picture, with Barkin citing headline PCE inflation at 3.7%, well above target. He structured his remarks around four puzzles he sees in the current economy: its overall resilience, a striking investment boom, unusually low unemployment, and inflation that refuses to complete its descent. On investment, Barkin pointed to real private nonresidential fixed investment growing at an annualised 9.5% in the first half of 2026, more than double the pre-pandemic decade average, with AI infrastructure spending as the primary driver but momentum broadening into bank lending, mergers and acquisitions, factory construction and defence spending. Business leaders, he said, increasingly treat high uncertainty as the new normal and feel they cannot afford to wait to invest.
On the labour market, Barkin described a genuine paradox: July payrolls fell by 23,000 even as the unemployment rate held at 4.1%, marking a 58th consecutive month at or below 4.5%, the longest such streak on record. His explanation was that slowing labour demand has been matched by an equally shrinking labour supply, as reduced immigration and an ageing population thin the pool of available workers even as hiring cools. He also pointed to a post pandemic willingness among consumers to keep spending despite falling real incomes, describing households trading down to cheaper goods and dipping into savings while remaining broadly employed, with wealthier households further cushioned by rising home and equity values.
On the core inflation question, Barkin declined to pick a side, laying out both the optimistic case that today's readings reflect fading shocks and the more pessimistic case that inflation has stayed elevated long enough to risk shifting expectations and require further tightening. New York Fed president John Williams was cited making a related point earlier in the week, arguing it would be appropriate to act if the economy is not clearly on a path back to 2%. Barkin closed without endorsing either view, saying he never prejudges the path forward and will keep gathering signals from business contacts and incoming data. That non-answer is being read as more significant than a typical dodge given that Chair Kevin Warsh has reportedly pulled back sharply on forward guidance since taking over in May, leaving markets unusually reliant on individual regional presidents, Barkin included, for directional clues the committee itself is no longer providing centrally.
Barkin does not hold an FOMC vote this year, but like his fellow non-voting presidents he still shapes the discussion behind the July decision, in which the committee held rates at 3.50% to 3.75% by a 9-3 vote, with Cleveland's Beth Hammack, Minneapolis's Neel Kashkari and Dallas's Lorie Logan dissenting in favour of a hike, the largest hawkish dissent bloc on the committee since 2016. Barkin's studied neutrality stands in clear contrast to Hammack, who has argued this week that policy is not currently restrictive and that the Fed needs to act now rather than wait, and to Goolsbee, who framed the latest inflation data as a little better and expressed hope that fading tariff and oil effects could put the economy back on what he called a golden path toward target.
Markets, for their part, have been trimming the odds of a September hike, with futures pricing dipping toward 50% following Wednesday's in line CPI print and Thursday's softer than expected PPI reading, itself accompanied by a weaker jobless claims number. Attention now turns to Friday's retail sales data, expected to show a modest 0.1% headline gain, and to the July FOMC meeting minutes due August 19, which should reveal how deeply the hawkish dissent was debated internally and are likely to be the most consequential input for rate pricing ahead of the September 15-16 decision.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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