Federal Reserve's Barkin: Clear direction for interest rate hikes, AI risks demand greater caution in policy pacing.

Richmond Federal Reserve President Tom Barkin signaled in a speech in South Carolina that interest rates still need to be raised, while emphasizing the need for a cautious pace of rate hikes. He delivered the remarks to the Greater Greer Chamber of Commerce that day, and will become a voting member of the Federal Open Market Committee (FOMC) in 2027. Barkin stated that inflation has been above the Fed’s 2% target for nearly six years, with risks to the central bank’s current dual mandate concentrated on the inflation side. Corporate profits are robust, consumers continue to spend, and unemployment has held at 4.5% or lower for a record period. He expects consumer spending will remain resilient through the end of the year; markets broadly anticipate a strong holiday shopping season, but how long this robust consumption momentum can persist remains an open question. Barkin also focused on potential demand shifts driven by the AI boom, noting that if technology underperforms expectations, corporate investment could contract, stock prices would decline, and consumption supported by asset appreciation might also cool.