Richmond Fed President: Hard to Judge Whether Rates Are Sufficiently Restrictive
N.R. Finch
Richmond Fed President Tom Barkin called the current 3.5%-3.75% rate level a 'hard call' on inflation and declined to say whether he would have joined three colleagues who voted to hike — leaving the September policy path wide open and fully data-dependent.
How divided is the Fed right now?
The Fed held rates steady this week in a 9-to-3 vote; three regional presidents voted for a 25-basis-point hike.
Barkin has no vote this year — he rotates on next year — but said he is "not sure" he would have sided with the dissenters.
This means → neither the hold camp nor the hike camp commands a clear consensus, and the data window before September carries outsized weight.
What inflation signal did he highlight?
Core inflation fell in June. Barkin called it a "positive sign" but immediately asked: "Have we got enough restraint, or do we need more?"
In plain terms = one month pointing the right way is not enough for him to decide — he wants a trend, not a single print.
He acknowledged "good reasons" for further tightening, yet said there is "time before the next meeting" to watch whether the current rate is already doing the job.
Where is the inflation pressure stuck?
Companies selling to business customers are pushing through 3%-4% price increases and largely succeeding, driven by oil, diesel, aluminium, fertiliser, and semiconductors.
Companies selling directly to consumers are "pretty frustrated" — shoppers are trading down or delaying big purchases, blocking pass-through.
This means → higher costs are sitting in retailers' inventory, not yet hitting the income statement. Inflation pressure is still building — the consumer side is just absorbing the delay for now.
Is anything working against the price pressure?
Barkin pointed to strong productivity growth as a potential buffer — firms may absorb costs they would otherwise pass on.
His bigger worry: consumer prices rising without underlying cost pressure to justify them — that would signal firms have regained pricing power, making inflation stickier.
"But I don't think we're there yet." Put simply = current price increases are still cost-push, not margin-grab — the situation is not as bad as the worst-case scenario.
Should the 2% target be changed?
Barkin personally favours a range target over a single 2% point target, but stressed: the Fed cannot credibly switch before hitting 2% first.
This reflects a credibility trap — "changing the goal mid-game" would tell markets the Fed itself doubts it can deliver, and the credibility damage would far outweigh any framework improvement.
He added that this was not what Fed Chair Kevin Warsh meant at this week's press conference.
What does Barkin's stance mean for September?
Barkin's consistent style is to describe what businesses in his district are feeling, rather than signal where rates should go.
With three hawkish voters already calling for a hike, his ambiguity shows the committee is far from aligned.
This means → the September policy direction is highly data-dependent on coming months' inflation and employment prints — markets should not front-run either a hike or a hold.
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